Lawmakers said April 6 they want to know who directed Revenue Commissioner Pat Galvin to pour $4.1 billion into a higher risk sub-account, then direct those funds into equities markets during two weeks in April 2008.

In a prepared statement April 7, Galvin said such decisions are made with direction from the Legislature, and no decision was made without prior notice to lawmakers.

"Contrary to the press reports, I don't believe any legislator is questioning my authority to make the transfer of funds from the main account into the sub-account." Galvin said. "Some are merely trying to avoid responsibility for that decision. That is a critical distinction. An unauthorized transfer would be extremely serious. This, however, is merely an exercise in political blame-shifting."

Galvin told lawmakers he had acted on his own authority as revenue commissioner and on the general direction of lawmakers pushing for higher returns on CBR investments.

"It's a little bit of Monday morning quarterbacking," Galvin said. "It is clearly within my authority to make the decision on how much to have in either of the accounts."

The issue comes at a time when legislators prepare to dip into the state's main savings account to balance a projected $2.3 billion deficit through the next fiscal year.

The reserve contained $6.4 billion in multiple accounts as of Feb. 28, the latest date for which figures are available.

Senate Finance Committee co-Chairman Bert Stedman, R-Sitka, is among several lawmakers who are troubled by what they call negligent money management by Galvin.

"This is the biggest financial boondoggle that I can recall that the state ever walked into," Stedman said. "You've got some issues out there the state, in retrospect, probably would have done differently. This is a colossal amount. Those pale in scale and scope to the issue in the CBR."

Stedman and other committee leaders say they do not recall giving the go-ahead to shift so much of the state's surplus into a sub-account. The account is designed for smaller amounts of investment in riskier markets with the potential for higher yields with money that will not be needed for at least five years.

The main CBR account is invested in safer markets, such as bonds.

When the markets crashed last fall, the sub-account lost an estimated $1.5 billion. That's more than enough to forward-fund education for a year, said committee member, Sen. Joe Thomas, D-Fairbanks.

Galvin said lawmakers don't even need to tap the CBR this year. The account is a last resort, he said.

He also said gains have been made recently.

"The sub-account has experienced a significant loss in market value, and that is very disappointing," he said. "But with the recent rebound in the equity market, there has been a recovery of well over $200 million in value.

"If the stock market continues to recover, by the end of the five-year investment window, we will be back to where we would have been if the transfer had not been made, or even better. That is the nature of investment."

Senate Finance Committee members have asked legislative auditors to review Galvin's decision-making process.