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106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    106-140

======================================================================



 
         ARIZONA STATEHOOD AND ENABLING ACT AMENDMENTS OF 1999

                                _______
                                

  May 13, 1999.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______


  Mr. Young of Alaska, from the Committee on Resources, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 747]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Resources, to whom was referred the bill 
(H.R. 747) to protect the permanent trust funds of the State of 
Arizona from erosion due to inflation and modify the basis on 
which distributions are made from those funds, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                          Purpose of the Bill

    The purpose of H.R. 747 is to protect the permanent trust 
funds of the State of Arizona from erosion due to inflation and 
modify the basis on which distributions are made from those 
funds.

                  Background and Need for Legislation

    Under the Enabling Act of 1910, the State of Arizona 
receives revenues generated from lands that were granted to the 
State upon admission to the Union. After deposit in several 
existing trust Funds, these revenues contribute funding for 
public schools, state colleges and universities, and other 
public institutions.
    As currently provided for in the original Enabling Act, the 
Funds must pay out all of their income, with ``income'' 
interpreted as all interest and dividends received. This 
creates a problem because it does not account for and adjust to 
rates of inflation. Inflation has averaged approximately 4.5% 
over the past 50 years and the income generated from the Funds 
has grown at less than the rate of inflation. To account for 
inflation, a portion of the interest should be retained and 
reinvested to fuel future income growth.
    Further, the current Enabling Act has a number of stringent 
investment restrictions. While these restrictions may have been 
appropriate at one time, they are outdated and are no longer 
advisable. The restrictions have severely limited the potential 
of the Funds to earn high returns and have also limited their 
ability to reduce risk through investment diversification.
    To make the necessary changes to allow the State trust 
Funds to be managed differently, it is necessary for Congress 
to approve of the changes as well as amend the Arizona Enabling 
Act.

                            Committee Action

    H.R. 747 was introduced on February 11, 1999, by 
Congressman Bob Stump (R-AZ). The bill was referred to the 
Committee on Resources, and within the Committee to the 
Subcommittee on National Parks and Public Lands. On April 29, 
1999, the Subcommittee met to mark up the bill. No amendments 
were offered. The bill was then ordered favorably reported to 
the Full Committee by voice vote. On May 5, 1999, the Full 
Resources Committee met to consider the bill. No amendments 
were offered and the bill was then ordered favorably reported 
to the House of Representatives by voice vote.

            Committee Oversight Findings and Recommendations

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Resources' oversight findings and recommendations 
are reflected in the body of this report.

                   Constitutional Authority Statement

    Article I, section 8 and Article IV, section 3 of the 
Constitution of the United States grant Congress the authority 
to enact this bill.

                    Compliance With House Rule XIII

    1. Cost of Legislation.--Clause 3(d)(2) of rule XIII of the 
Rules of the House of Representatives requires an estimate and 
a comparison by the Committee of the costs which would be 
incurred in carrying out this bill. However, clause 3(d)(3)(B) 
of that rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974.
    2. Congressional Budget Act.--As required by clause 3(c)(2) 
of rule XIII of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, this 
bill does not contain any new budget authority, spending 
authority, credit authority, or an increase or decrease in 
revenues or tax expenditures.
    3. Government Reform Oversight Findings.--Under clause 
3(c)(4) of rule XIII of the Rules of the House of 
Representatives, the Committee has received no report of 
oversight findings and recommendations from the Committee on 
Government Reform on this bill.
    4. Congressional Budget Office Cost Estimate.--Under clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 403 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for this bill from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 11, 1999.
Hon. Don Young,
Chairman, Committee on Resources,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 747, the Arizona 
Statehood and Enabling Act Amendments of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Marjorie A. 
Miller (for the state and local impact) and Victoria Heid Hall 
(for federal costs).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

               congressional budget office cost estimate

H.R. 747--Arizona Statehood and Enabling Act Amendments of 1999

    H.R. 747 would amend the Arizona Statehood and Enabling Act 
of 1910 and would consent to amendments to the constitution of 
the state of Arizona approved by the voters on November 3, 
1998. These amendments generally concern the administration of 
the state's permanent trust funds. Congressional consent to the 
amendments to the constitution of the state of Arizona is 
required before they can be implemented by the state 
government.
    CBO estimates that enacting H.R. 747 would have no effect 
on the federal budget. Because the bill would not affect direct 
spending or receipts, pay-as-you-go procedures would not apply. 
H.R. 747 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments. 
Enactment of this bill would give Arizona state officials 
greater flexibility in investing and distributing the assets of 
the state's permanent funds.
    The estimate was prepared by Marjorie A. Miller (for the 
state and local impact) and Victoria Heid Hall (for federal 
costs). This estimate was approved by Paul N. Van de Water, 
Assistant Director for Budget Analysis.

                    Compliance With Public Law 104-4

    This bill contains no unfunded mandates.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                          ACT OF JUNE 20, 1910


    CHAP. 310.--An Act To enable the people of New Mexico to form a 
constitution and state government and be admitted into the Union on an 
  equal footing with the original States; and to enable the people of 
  Arizona to form a constitution and state government and be admitted 
into the Union on an equal footing with the original States.

           *       *       *       *       *       *       *


  Sec. 25. That in lieu of the grant of land for purposes of 
internal improvements made to new States by the eighth section 
of the Act of September fourth, eighteen hundred and forty-one, 
and in lieu of the swamp-land grant made by the Act of 
September twenty-eighth, eighteen hundred and fifty, and 
section twenty-four hundred and seventy-nine of the Revised 
Statutes, and in lieu of the grant of thirty thousand acres for 
each Senator and Representative in Congress, made by the Act of 
July second, eighteen hundred and three, which grants are 
hereby declared not to extend to the said State, the following 
grants are hereby made, to wit:
  For university purposes, two hundred thousand acres; for 
legislative, executive, and judicial public buildings 
heretofore erected in said Territory or to be hereafter erected 
in the proposed State, and for the payment of the bonds 
heretofore or hereafter issued therefor, one hundred thousand 
acres; for penitentiaries, one hundred thousand acres; for 
insane asylums, one hundred thousand acres; for school and 
asylums for the deaf, dumb, and the blind, one hundred thousand 
acres; for miners' hospitals for disabled miners, fifty 
thousand acres; for normal schools, two hundred thousand acres; 
for state charitable, penal, and reformatory institutions, one 
hundred thousand acres; for agricultural and mechanical 
colleges, one hundred and fifty thousand acres; and the 
national appropriation heretofore annually paid for the 
agricultural and mechanical college to said Territory shall, 
until further order of Congress, continue to be paid to said 
State for the use of said institution; for school of mines, one 
hundred and fifty thousand acres; for military institutes, one 
hundred thousand acres; and for the payment of the bonds and 
accrued interest thereon issued by Maricopia, Pima, Yavapai, 
and Coconino counties, Arizona, which said bonds were 
validated, approved, and confirmed by the Act of Congress of 
June sixth, eighteen hundred and ninety-six (Twenty-ninth 
Statutes, page two hundred and sixty-two), one million acres: 
Provided, That if there shall remain any of the one million 
acres of land so granted, or of the proceeds of the sale or 
lease thereof, or rents, issues, or other profits therefrom, 
after the payment of said debts, such remainder of lands and 
the proceeds of sales thereof shall be added to and become a 
part of the permanent school fund of said State, [the income 
therefrom only to be used] distributions from which shall be 
made in accordance with the first paragraph of section 28 and 
shall be used for the maintenance of the common schools of said 
State.

           *       *       *       *       *       *       *

  Sec. 27. That five per centum of the proceeds of sales of 
public lands lying within said State which shall be sold by the 
United States subsequent to the admission of said State into 
the Union, after deducting all the expenses incident to such 
sales, shall be paid to the said State to be used as a 
permanent inviolable fund, [the interest of which only shall be 
expended] distributions from which shall be made in accordance 
with the first paragraph of section 28 and shall be expended 
for the support of the common schools within said State.
  Sec. 28. That it is hereby declared that all lands hereby 
granted, including those which, having been heretofore granted 
to the said Territory, are hereby expressly transferred and 
confirmed to the said State, shall be by the said State held in 
trust, to be disposed of in whole or in part only in manner as 
herein provided and for the several objects specified in the 
respective granting and confirmatory provisions, and that the 
natural products and money proceeds of any of said lands shall 
be subject to the same trusts as the lands producing the same. 
The trust funds (including all interest, dividends, other 
income, and appreciation in the market value of assets of the 
funds) shall be prudently invested on a total rate of return 
basis. Distributions from the trust funds shall be made as 
provided in Article 10, Section 7 of the Constitution of the 
State of Arizona.
  Disposition of any of said lands, or of any money or thing of 
value directly or indirectly derived therefrom, for any object 
other than for which such particular lands, or the lands from 
which such money or thing of value shall have been derived, 
were granted or confirmed, or in any manner contrary to the 
provisions of this Act, shall be deemed a breach of trust, 
except that amounts in the Miners' Hospital Endowment Fund may 
be used for the benefit of the Arizona Pioneers' Home.

           *       *       *       *       *       *       *