Legislature(1999 - 2000)
03/22/2000 01:50 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE JOINT RESOLUTION NO. 2
Proposing amendments to the Constitution of the State
of Alaska relating to a biennial state budget, to the
appropriation limit, and to appropriations from the
budget reserve fund.
Representative Phillips, Sponsor, spoke in support of the
legislation. She noted that HJR 2 proposes an amendment to
Alaska's Constitution to allow for biennial budgeting, and
authorizes the governor to present the legislature with a
budget encompassing two fiscal years. As written, the
first session of the Legislature would be dedicated to
writing a two-year budget. Supplemental budgets could
address necessary adjustments, when needed.
Representative Phillips maintained that Alaska's annual
budget cycle is an arduous process, taking up most of the
year. "Every year hundreds of people from State agencies
spend countless hours preparing for budget presentations to
the Legislature through hearings, debates and closeouts.
There is no doubt that the budget is the single most
important piece of legislation that legislators produce for
the people of Alaska."
"Changing this process to a biennial budget cycle would be
very beneficial to our State. Significant cost savings for
the Legislature, Administration and the agencies could be
achieved as well as far greater efficiencies and
productivity by all. Savings are measured in actual dollars
and employee productivity. Costs savings are realized in
travel and per diem dollars. Significant productivity
savings will be achieved in time that can be utilized for
programs rather than budget preparation."
"A biennial state budget system would allow us to address
the budget in the first year of session and focus primarily
on legislation in the second year. A biennial state budget
process would also work hand-in-hand with the results-based
budget concept pursued by the legislature. State agencies
would have a chance to initiate advance-planning efforts -
something, which is very difficult under the present annual
state budget system. Alaska would not be unique in adopting
a biennial legislative budget cycle."
"Research demonstrates that twenty other states operate
under a Biennial State Budget system. Systems of other
states could be used as a viable guide for Alaska's
transition into a biennial budget process. The Legislature
loses no control over the budget process by changing to a
biennial budget cycle."
Representative Phillips continued: "Sound public policy is
paramount to a smooth transition into a new state budget
system. Legislative control over the process is mandatory
in a biennial state budget system. This may suggest a
legislative transition team composed of joint member
legislators, and the Administration."
"In my opinion and as proven in other states where the
biennial cycle is already in place, the greatest benefit of
a biennial budget process is the increased efficiency and
productivity that can be achieved by State agencies.
Alaskans statewide constantly implore us to become more
efficient and increase our productivity. Besides achieving
these goals, and the actual costs savings of approximately
(and very conservatively, I might add) $2.5 million dollars,
associate with a shortened session in the second year, the
proposed biennial budget system is a win-win concept for
Alaska." She concluded that the biennial system would be in
keeping with the restructuring of government: cutting waste,
privatization, results based budgeting, consolidation of and
services. She maintained that biennial budgeting would enjoy
greater efficiencies and provide major savings in time and
money."
Vice Chair Bunde observed that there are fluctuations in
Alaska's oil based income and questioned how a biennial
legislature could cope with changes in the price of oil.
Representative Phillips pointed out that there are other
states that have biennial budgets.
Representative G. Davis suggested that biennial budgeting
would give legislators more time in the field to verify what
the departments are telling them.
Representative Grussendorf suggested that states with a
biennial system have static conditions without gigantic
shifts in the market. He added that a first term governor
would inherit the budget of his predecessor.
Co-Chair Therriault questioned if each odd year would be the
120-day session. Representative Phillips clarified that each
new legislature would have a 120-day session on their first
year.
Representative Phillips stressed the need to stabilize
Alaska's economy with a long-range plan.
Representative J. Davies expressed concern that the
legislature would not have enough time to really understand
budgets. He suggested that budgets be divided: half of the
budget would be addressed each year. He observed that there
has not been sufficient time to review data in the current
subcommittee process. He observed that his father, who was
an official in the state of Washington, found that he spent
all most as much time preparing supplemental budgets in the
off year as the regular budget. He questioned if the savings
were overstated.
Representative Phillips pointed out that some states have
allowed their finance committees to meet during the interim.
She observed that teleconferencing could be utilized.
KAREN COWART, GENERAL MANAGER, ALASKA SUPPORT INDUSTRY
ALLIANCE (THE ALLIANCE), ANCHORAGE testified via
teleconference in support of HJR 2. She read from a prepared
statement:
The Alaska Support Industry Alliance is a non-profit
trade association representing over 350 members engaged
in business within the oil, gas, and mining industries.
Collectively, we represent over 29,000 employees. Our
mission is to foster and promote the safe and
environmentally sound development of Alaska's natural
resources.
We believe state government should do business like a
business and investigate new ideas that would allow
government to do more with less - be more efficient and
effective in planning and executing our state budget
and budget process. Budgetary efficiency would send a
message to potential investors that we have a solid and
sound fiscal plan, and our "House is in order - a good
place to do business".
(TAPE CHANGE, HFC 00 - 79, SIDE 1)
We believe a two-year budget cycle could result in the
following:
á An opportunity for agency planning - proactive
spending habits instead of reactive spending
dialogue;
á The opportunity to analyze state programs based on
performance and results prior to yearly budget
appropriations:
á The potential for a shortened legislative session,
thereby saving state dollars and resources; and
á A greater utilization of all 60 legislators and
their expertise. Traditionally, the Senate/House
Finance Committees are made up of the more senior
members of each body. The House Finance Committee
members serve on no other committee. In many cases,
we are missing their valuable input, wisdom and vast
experience in legislation creation due to physical
time restraints. A two-year process would give all
legislators a chance to voice their opinions in the
early stages of legislation and budget development.
But, what about emergency needs or supplemental
requirements?
A biennial budget process would not preclude
supplemental budget considerations due to circumstances
of need. These could be addressed on a case-by-case
need.
Nevertheless, the process would free up legislators to
focus attention - one year on budget, one year on
legislation.
Twenty states have already adopted a biennial budget
process. That's a good indication that other states
are "thinking outside the box".
We believe Alaska needs to embrace a new way of
thinking. We must look at new and innovative ways to
conduct business. We encourage the dialogue on a
biennial budget process to continue.
MARK LANGLAND, PRESIDENT, FISCAL POLICY COUNCIL, ANCHORAGE
testified via teleconference in support of the legislation.
He maintained that biennial budgeting would create
efficiencies and fit nicely with a long-range fiscal plan.
He felt that a biennial budget would benefit the fiscal
process. He pointed out that the Constitutional Budget
Reserve would provide a funding source to pick up the slack.
He maintained that biennial budgeting would force the
legislature to protect the Constitutional Budget Reserve in
order to maintain a shock absorber that can provide for the
fluctuation of earnings. Planning gives more credibility and
comfort to the business community and provides better
opportunity for efficiencies.
CHERYL FRESCA, ALASKA POLICY COUNCIL, ANCHORAGE testified
via teleconference in support of the legislation. She
observed that she spent 17 years working with the state's
budget as legislative staff and in the Office of Management
and Budget. She emphasized the amount of time required for
executive branch agencies to prepare their annual budget
requests to the legislature and the work that is necessary
to close out a fiscal year. A two-year budget cycle would
provide significant productivity savings for administrative
and program staff involved in the various stages of budget
work. The challenge would be to free up resources and give
managers flexibility. The objections to a two-year budget
are no longer relevant. Fluctuations in the annual budget
are not a reason not to do biennial budgeting. The use of
the Constitutional Budget Reserve has changed the importance
of the revenue forecast. She maintained that biennial
budgeting would shift the legislature's function to
evaluating results.
Vice Chair Bunde observed that there are only a few years
left to the Constitutional Budget Reserve. He questioned if
a consequence of biennial budgeting would be to force the
state into a long-range plan. Ms. Fresca agreed that
biennial budgeting would encourage long-range planning. She
noted that fluctuations in revenue would still determine the
amount of revenues from the Constitutional Budget Reserve,
but pointed out that withdraws would be taken annually.
KAREN BRAND, VICE PRESIDENT, ALASKA STATE CHAMBER OF
COMMERCE, JUNEAU testified in support of the legislation. In
response to a question by Co-Chair Therriault, Ms. Brand
noted that the state Chamber is on an annual budget cycle.
JACK FARGNOLI, POLICY ANALYST, OFFICE OF MANAGEMENT AND
BUDGET spoke in support of the legislation. He maintained
that a biennial budget approach would encourage longer
planning timeframes for fiscal and program planning, work
well with performance measures, give a emphasizes for long-
term planning within programs, and allow for targeted depth
of treatment by the legislature and program managers for
policy needs within program areas.
The Office of the Governor has looked at the cost and
savings. Mr. Fargnoli stated that the greatest savings would
be in the shortening of legislative sessions in terms of
employees. Savings in employee productivity could be
redirected to other areas. There would also be savings in
travel and per diem.
Mr. Fargnoli stated that the Administration's only concern
is in regards to timing. The legislation provides for the
ballot question to come before voters in November. He
pointed out that departments and agencies begin budget
development as soon as the legislative session adjourns.
Agencies would need to know the outcome in order to create
their budgets. He observed that there are a number of ways
the issue could be addressed. A few departments could be
selected to begin the process. He noted that there could be
discussion during the interim on implementation.
Mr. Fargnoli added that there would always be a need for a
supplemental. He suggested that additional provisions be
considered to deal with other economic or social changes of
magnitude required during the second year of the biennial
process. He observed that the Constitutional Budget Reserve
fund helps to stabilize and regulate the flow. He reiterated
that the Administration would look forward to further
discussions regarding implementation.
Vice Chair Bunde asked the project longevity of the
Constitutional Budget Reserve fund. Mr. Fargnoli did not
know but added that the fund has continued through
projections of its demise.
Vice Chair Bunde emphasized that the supplemental can be a
significant amount of work. Mr. Fargnoli observed that other
states have handled their supplemental in a variety of ways.
There are states that have a session every other year and
that have their finance committees meet on the second year.
There are other states that meet two years in a row. The
only consensus, according to the National Conference of
State Legislators, is that the amount of legislative
activity in a biennial regime was somewhat more than the
ideal theory.
Representative J. Davies summarized that according to the
Administration that the primary savings would stem from the
fact that the legislature would be around less. Co-Chair
Therriault observed that the Department of Health and Social
Services' budget has large general fund portion built on
formulas and caseload. He stated that it would be impossible
to estimate the cost over a two-year period. He maintained
that the subcommittee chairman for the department would have
to go through the same process on the second year. He did
not see any savings in the Department of Health and Social
Services' budget. The legislature would not have the
department under its control on the second year. He observed
that if the department doesn't operate a program the way the
legislature directs than their only option would be to cut
the funding in a supplemental after it has already been
appropriated. He did not see that biennial budgeting would
work well for the Department of Health and Social Services.
Representative Phillips argued that the legislature
establishes the policy. Savings would be derived from
freeing agency personnel from work on the budget.
Representative J. Davies noted that the substantial savings
would come from a shortening of the time the legislature
spends working on the budget. He maintained that the time
the legislature spends on the budget is already
insufficient. He expressed concern that there would be less
legislative oversight.
Representative Phillips maintained that the legislature
could spend more time on the budget if it determined it was
necessary. Representative J. Davies pointed out that the
bill would reduce the amount of time in session.
Representative J. Davies observed that the National
Conference of Legislators found that the expected savings
from the agencies is generally overrated. The real savings
comes from the legislature being out of session. Mr.
Fargnoli agreed that the savings have generally been across
the board less than expected. He pointed out that the
legislature has a lot of latitude for designing and
implementing a program.
GINGER BLAISDELL, FISCAL ANALYST, LEGISLATIVE FINANCE
DIVISION noted that Representative Phillips had requested an
analysis of the legislation. She provided members with a
memorandum on biennial budgeting dated 1/25/00 (copy on
file). The memorandum compared the biennial budget process
of other states. She noted that most of the states contacted
had transitioned from an annual to a biennial budget or had
always had a biennial budget. No states had transitioned
from a biennial to annual budget in the last 20 years. All
the states began with a biennial budget. Biennial budgets
were adopted to allow citizen legislators. Most states that
transitioned to annual budgets did so as state budgets and
issues became more complex. States that transitioned back to
a biennial budget did so to encourage long term planning and
to reduce legislative sessions.
Ms. Blaisdell noted that fiscal analysts of five states were
contacted. She reviewed opinions of the fiscal analysts that
were contacted. Analysts noted that there was less stress on
the legislature. In Arizona, the governor is allowed to
submit adjustments to the appropriation measure. Only
technical corrections, non-general fund increments and
caseload driven changes are accepted. Formula funded
programs could be adjusted any year. The interim year
adjusted bill took only three weeks from the time it was
introduced to the time it was passed due to the restrictions
placed on it.
Ms. Blaisdell observed that the state of Connecticut began
budget reform in 1981. At that time they had a 20 percent
deficit of $961 million dollars. Their reform bill included
an income tax proposal, multi year budgeting, and a spending
cap. The off budget year was intended to focus on
performance measure. The fiscal analyst contacted stated
that the focus on performance measures had not occurred due
to significant changes in the off year and interest in
performance measures had waned.
Ms. Blaisdell observed that in Oregon, the biennial budget
tends to be slightly more conservative if the budget is
limited to the revenue forecast. If revenues drop lower than
the forecast a special session is called. If revenues
increase than a savings is realized, since the budget is
locked in. The biennial budget is fairly constant and
developed over an 18-month period. The governor has more
time to review agency requests. Complete budget information
is provided one month prior to the start of the legislative
session.
Ms. Blaisdell reviewed the biennial process in Texas. She
noted that the resource impact is smaller than Alaska's. The
fiscal analyst in Texas recommended that future needs should
be estimated three and a half years from preparation to full
implementation. She observed that the fall forecast of 1999
would be forecasting revenues through the year 2002. He also
recommended provisions to allow the legislature to meet in
times of crisis: some states call special sessions; some
offer a supplemental bill; and some have emergency boards
(similar to the Legislative Budget and Audit Committee).
Texas found that two-year budgets force agencies to plan and
prioritize for the long-term; outcome based budgeting
process places even greater emphasize on long range planning
and discourages tinkering and micro management of one year
budgets; and gives agencies the flexibility to concentrate
on how best to produce results, whether than how to justify
spending needs.
Ms. Blaisdell reviewed the comments of the state of
Washington's fiscal analyst. Timesaving within an agency
allows that agency to focus on the issues at hand rather
than budget preparation. The downside of biennial budgeting
is that the cost of starting new programs is more tempting.
If a new program is presented to the legislature and they
agree to fund it for the second of the two-year cycle, the
following budget will require an increment to full-fund the
program for a complete two-year cycle.
Vice Chair Bunde questioned if most new programs occurred on
the second year of the cycle. Ms. Blaisdell did not know,
but stated that construction projects that were budgeted to
be built may not be budgeted to be fully staffed. She added
that an agency, such as Office of Management and Budget,
would have to be more diligent about planned spending in a
two-year process.
Representative J. Davies observed that the Texas
legislature, in terms of general funds, only has control
over approximately 17 percent of the budget. Ms. Blaisdell
noted that the state of Texas has a larger amount of
dedicated funds, similar to Alaska's statutory designated
program receipts. There are also municipal revenues that are
paid on a local level, which made it difficult to compare to
Alaska.
TRACI CARPENTER, FISCAL ANALYST, LEGISLATIVE FINANCE
DIVISION she stated that the Division attempted to calculate
the amount of time spent by agency staff on budget
preparation, presentation, and travel. These costs were
divided into first and second years. She concluded that the
real savings would be in terms of the shorter legislative
session.
(TAPE CHANGE, HFC 00 - 79, SIDE 2)
Ms. Carpenter noted that the estimates by the Legislative
Finance Division were within a million dollars of the Office
of Management and Budget's.
Representative J. Davies questioned where the savings would
be realized. Ms. Carpenter responded that real savings would
be in travel and per diem. Productivity savings would be on
the administrative services directors' level. Uncompensated
overtime couldn't be quantified.
TAMARA COOK, DIRECTOR, LEGISLATIVE LEGAL AND RESEARCH
SECTION, LEGISLATIVE AFFAIRS AGENCY provided information on
the legislation. She explained that the House Judiciary
version added section 1, which contains provisions
addressing the length of the sessions. In addition, the
Judiciary Committee looked at two provisions in the
Constitution that are difficult to deal with in the context
of developing a biennial budget constitutional amendment.
The appropriation limit was drafted on the premise that a
single fiscal year would be compared to a single fiscal
year. It would have to be amended to address two fiscal
years. A similar provision is contained in subsection (b) of
the Constitutional Budget Reserve, which contains a formula
under which the legislature can access CBR funds based on
what money was available from the proceeding year to the
current year. This provision would have to be amended. To
prevent the legislature from being prohibited access to the
fund. She explained that the Judiciary Committee decided not
to address the issues due to concerns over the Bess opinion,
which addresses the number of subjects that a proposed
constitutional amendment can include. The original bill
doubled the appropriation limit and repealed subsection (b)
of the Constitutional Budget Reserve based on Bess concerns.
KARLA SCHOFIELD, DEPUTY DIRECTOR, ADMINISTRATIVE SERVICES,
LEGISLATIVE AFFAIRS AGENCY provided information on the
legislation. She observed that there would be a $20 thousand
dollar savings for each day the legislative session was
shortened. Session per diem totals $9,500 dollars a day;
reduced legislative staff would account for the majority of
the rest of the savings. The Legislative Affairs Agency did
not prepare a fiscal note. A 60-day session would result in
a $1.6 million dollars savings every other year.
HJR 2 was heard and HELD in Committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|