Legislature(2005 - 2006)HOUSE FINANCE 519
03/14/2005 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SJR6 | |
| HB155 | |
| SB98 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| SJR 6 | |||
| HB 155 | |||
| = | SB 98 | ||
CS FOR SENATE BILL NO. 98(FIN) am
"An Act making supplemental appropriations, capital
appropriations, and other appropriations; amending
appropriations; making appropriations to capitalize
funds; making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
Sections 7(a) - 7(e)
Appropriations associated with the Natural Gas Pipeline
BOB BARTHOLOMEW, CHIEF OPERATING OFFICER, ALASKA PERMANENT
FUND CORPORATION, DEPARTMENT OF REVENUE, responded to
questions regarding the use of permanent fund receipts. The
Board does not take a position on the expenditure of
permanent fund earnings. The Board manages the investments
and it is the Legislature's prerogative on how the earnings
are used. The Corporation does recommend that any use of the
earnings stay within the annual sustainable earnings of the
Fund, which is 5% of its value.
Mr. Bartholomew spoke to corporate receipts. He observed
that receipts are used to fund the Corporation's operating
budget (the cost of investment management). There has been
an additional use of receipts to cover costs relating (in
some sense) to the collection of royalty revenues. The Board
accounts for, but has no comment on this use.
Mr. Bartholomew noted that the designation of corporate
receipts is important from the investment management
prospective. The designation allows expenditures of the
investment revenues, before calculating the amount available
for distribution. Corporation receipts come from gross
revenues, not the Earnings Reserve Account. He observed
that $64 million dollars designated as corporate receipts
have been spent out of the Fund, which did not pertain to
the cost of managing the Fund. Mr. Bartholomew commented on
the difference between what is accounted for as corporate
receipts and what comes out of the Earnings Reserve Account.
Corporate receipts come "up stream", out of revenues, minus
expenditures. The determination of net income goes into the
statutory formulas for what is available for distribution:
50 percent of which goes to dividends. Other expenditures
would have to be clarified as to whether they are coming out
of the Earnings Reserve Account or "up stream" out of
corporate receipts.
Representative Croft asked if it would affect future
calculations of available distributions, which would affect
the dividend. Mr. Bartholomew observed that anytime money is
taken out of the Permanent Fund, it affects future earnings.
Representative Croft asked if the $7 million dollar
diversion of monies affected the dividend. Mr. Bartholomew
stated that they had not.
Representative Hawker thought that the affect on dividends
would be .85 cents after five years. Mr. Bartholomew agreed
that the estimate would be in the "ball park" range.
Representative Croft asked the Department of Revenue to
provide an estimate. Mr. Bartholomew agreed.
2:45:12 PM
Co-Chair Chenault questioned if the investments, over time,
would help bolster the Fund. Mr. Bob Bartholomew replied
that there are two lines that show the expenditures: the
costs of investment management and other appropriations,
which relate to royalty payments. He observed that 25
percent of royalty payments go into the Permanent Fund. The
Fund has received approximately $7 billion in royalty
payments. Any increase in royalties would correspond to an
increase in the Permanent Fund.
In response to a question by Vice-Chair Stoltze, Mr.
Bartholomew discussed sources of oil revenue. He noted that
the three largest are: royalties, severance tax and
corporate income tax. Royalties are the primary source of
the Permanent Fund's deposit from mineral income. The Fund
does not receive a share of corporate income tax or the
severance tax.
In response to a question by Representative Stoltze, Mr.
Bartholomew noted that the Board of Trustees has a neutral
position on the use of earnings.
2:48:48 PM
In response to a question by Representative Weyhrauch, Mr.
Bartholomew reiterated that corporate receipts come out of
the revenues of the investment. Statutes determine what is
available for appropriation from the Fund and are determined
"downstream" as the net income. The net income goes into the
formula adopted by statute, which leads to a five-year
average. Currently, 50 percent of this amount goes to the
dividend. Corporate receipts don't have a limit. They are
an appropriation of gross revenues of investment income.
Earnings go through the Earnings Reserve Account and are
either subject to the statutory formula. Under the
Constitution all of the earnings are available for
appropriation.
2:50:56 PM
Representative Kelly referred to the $64 million [spent from
the Fund] not related to the management of the Permanent
Fund.
Mr. Bartholomew reviewed expenditures. Money has been spent
from the Permanent Fund for the cost of the Corporation and
costs of investments. Corporate receipts have also been used
for three agencies. He observed that $65 million was
appropriated between 1989 to 2004: Department of Law - 70
percent, Department of Natural Resources - 15 percent, and
Department of Revenue - 5 percent. The Department of Law's
funding was related to litigation on settlements. In
addition, $13 billion has been appropriated based on the
statutory formula leading to the dividend fund distribution:
$12.5 to dividends and $480 million for various programs. He
discussed some of the programs funded. The Permanent Fund
Division receives costs associated with the payout ($5
million a year). The Department of Health and Social
Services' has a Hold Harmless Program. The Departments of
Public Safety and Corrections receive dividends withheld
from felons. There is also a small amount to legislature.
Representative Croft questioned if expenditures have settled
to a yearly average. Mr. Bartholomew observed that the peak
was in the late 1980's and early 1990's, due to a large
level of litigation. In 1994, $10 million dollars was
withdrawn. There was $5.5 withdrawn in 2004 and $6.8 million
withdrawn in 2005. The FY 05 supplemental request is for
another $6 million. Representative Croft concluded that the
FY05 upstream intake would be doubled. Mr. Bartholomew
agreed and pointed out that expenditures are associated with
the proposed natural gas pipeline. Representative Croft
pointed out that the Permanent Fund receives 25 percent of
the royalty and lease, not 25 percent of the oil revenues.
He thought the percentage [of oil revenue received by the
Fund] would be closer to 10 percent.
2:55:42 PM
Vice-Chair Stoltze asked how much the hold harmless draw is.
Mr. Bartholomew noted that the draw has been between $15.4
and $15.9 million in the last two years. He added that any
allocations that come out of the Dividend Fund would go out
in dividends if they were not otherwise expended.
Representative Kelly observed that the public has indicated
that dividends should not be touched and expressed concern
with the appropriation in the fast track. He did not think
the approach was "straight up".
2:58:58 PM
Section 8 (a)
ANWR Total $500
Funds for support of national efforts to open ANWR for
oil and gas exploration and development
LINDA PEREZ, ADMINISTRATIVE DIRECTOR, DIVISION OF
ADMINISTRATIVE SERVICES, OFFICE OF THE GOVERNOR, spoke in
support of the appropriation. The Senate removed the
original language, which would have appropriated the grant
directly to Arctic Power. The Administration has requested
that the language be restored. Without the language the
Administration would have to go through a request for
proposals. She stressed that a direct grant would be faster.
The version before the Committee would provide a direct
appropriation to the Office of the Governor, without any
mention of Arctic Power.
Representative Hawker observed that the appropriation would
be subject to the state of Alaska's procurement code, which
would require competitive contracting, as opposed to a named
recipient grants, which would be recognized instantly. Ms.
Perez agreed and noted that it would add to the timeframe.
Representative Kelly referred to an earlier discussion about
Arctic Power and the change in staff. He questioned the
intent in the deletion [of Arctic Power] by the Senate. Ms.
Perez noted that the change occurred as a result of a Senate
floor amendment; he could not speak to the intent.
Section 9 (a) Alaskan Pioneer Homes: Pioneer Homes
Replacing unrealizable federal Medicaid funds with
receipt supported services. Lower receipts is due to
the voluntary nature of residents signing up for
Medicaid.
(1,200.0) 1,200.0 Receipt Supported Services 0.0
Section 9 (b) Health & Soc Srvcs Behavioral Health:
Behavioral Health Medicaid Svc Medicaid caseload growth
above FY 05 budget projections. At current expenditure
rate, the existing appropriation will be gone in April
or May.
$2,653.7 General Fund $3,517.7 Federal Funds
$6,171.4 Total funds
JANET CLARK, ASSISTANT COMMISSIONER, DIVISION OF FINANCE AND
MANAGEMENT SERVICES, DEPARTMENT OF HEALTH AND SOCIAL
SERVICES, explained that there was no change to sections
9(a) or 9(b) on the Senate side. She noted that the in the
FY05 budget the department began to purse Medicaid
eligibility for residents of the pioneer homes. There was a
slower, than anticipated, ability to earn these federal
receipts. However, there has been an increase in receipts
paid by residents for a net zero in funding.
3:04:28 PM
Section 9 (c) Health & Social Services Health Care Services:
Women's and Adolescents Services Feds reduced FFY05
funding in the Breast and Cervical Cancer screening
program. The fund source change will allow services to
1600 enrolled women that otherwise would not be served
due to federal funding reductions. Funds will be
required by late March or early April to continue the
program.
$500.0 GF (500.0) 0.0
Ms. Clark apologized for a miscommunication, which indicated
that the Department had received a reduction in federal
funds from FY04 to FY05. Federal money has not been reduced.
There was a misunderstanding between the program staff and
the budget staff. The program had applied for an increased
federal allocation. When the increase did not occur, they
perceived it as a reduction. The FY05 federal allocation is
$1.9 million, the same as FY04.
Ms. Clark clarified that without the supplemental request
the department would have to restrict access to the Breast
and Cervical Program and will not be able to serve all those
that are currently eligible and who have applied. The
program can only save $250 thousand if service is restricted
on April 1 to women ages 40 - 64 (the program currently
serves women ages 18 - 64). The program serves 6,000 women
annually and provides clinical breast exams, pelvic exams
and pap smear tests to women ages 18 - 64. The program also
provides screening mammograms for women age 50 - 64, which
is the highest risk group. The program is always the payer
of last resort. Income eligibility is 250 percent of
poverty, which is consistent with 37 other states that
provide the same service.
In response to a question by Vice-Chair Meyer, Ms. Clark
noted that states set the ages of service. Alaska has
provided screening for women ages 18 - 64 since the
program's inception. Mammograms are considered diagnostic
and are provided to the suggested age group of women who are
50 - 64 years of age.
Co-Chair Meyer asked about the high-risk group. Ms. Clark
clarified that mammograms are recommended every couple of
years for women who are 40 years old; and every year for
those 50 years of age or older. The state does not cover the
age 40 - 50 group. Co-Chair Meyer questioned how Alaska
compares with other states. Ms. Clark stated that Alaska's
program provides "very minimal coverage". Most state
programs are the same on coverage, but differ as to the age
of women served. Some states do not serve the 18 - 40 age
group. The service array is the same.
In response to a question by Co-Chair Meyer, Ms Clark noted
that a reduction in service to age 40 and above would not
result in sufficient savings, due to the time remaining in
the current fiscal year. She did not know what the savings
would be if the age of those served were changed for a full
fiscal year. She noted that a number of states cover the
same age group as Alaska.
3:11:04 PM
Representative Hawker observed that the Administration was
aware in September that $500 thousand in federal funds would
not be available. He asked why corrections were not made at
that time to modify the program, to account for the lack of
federal funding. He noted that the department could have
reduced coverage to 30 years of age and over in order to
reduce the impact. Ms. Clark replied that the Administration
felt that program should be continued and a supplemental
sought since it has such a direct impact on saving women's
lives. Representative Hawker asked if the Administration
considered providing funds through the Governor's Office.
Ms. Clark reiterate the belief that the Legislature would
approve the supplemental and see the merits of the program
since it directly saves lives.
Representative Hawker pointed to inconsistencies. He felt
there was a conflict between the Administration's request
for legislative guidance and their actions regarding the
request. Ms. Clark disagreed; she pointed out that the
Administration was in front of Legislature and acknowledged
the Legislature's authority to decide the appropriate
funding level.
Representative Kelly asked what percentage of population
served is Alaska Native. Ms. Clark did not know the exact
percentage, but observed that the program does not serve
those that are eligible for funding through Indian Health
Services (HIS). He suggested that an adjustment in age
population could have been done, in order to protect the
high-risk group. He felt the poverty level was appropriate
and noted the affect of the missing $500 thousand in federal
funds.
3:17:47 PM
Representative Croft questioned how many women would be
served by the $500,000 request.
DEB ERICKSON, DEPUTY DIRECTOR, PUBLIC HEALTH, noted that
with the additional funding, 7,400 women would be served (if
services were continued at the same level). Without the
request only 5,500 women would be served. The request would
fund an additional 1,800 to 2,000 women.
Representative Croft noted that the cost is approximately
$300 per person. He asked if that number includes the
examination and "some sort of last ditch insurance". Ms.
Clark clarified that the program would only cover the
screening program itself.
Mr. Croft asked what would happen to someone who does not
have insurance, who finds that they have cancers as a result
of the screening. Ms. Clark noted that women with cancer
would be eligible for Medicaid, which would pay for
treatment. Representative Croft stressed that the program
provides prevention and avoids a tremendous amount of cost
as well as human tragedy. Ms. Clark estimated that for every
dollar spent there is a $7 dollar savings in treatment with
an early diagnosis.
3:21:18 PM
Section 9 (b)
Ms. Clark observed that there was no change in the request
for the Behavior Health Program.
Section 9 (e)
There were no questions on Section 9 (e).
3:22:13 PM
Section 10 (a)
There were no questions for Section 10 (a), which remained
the same.
Section 10 (b)
Contractual costs for a prosecutor to represent the
Department of Law in the Therapeutic Courts program.
DAVID MARQUEZ, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, observed noted that a prosecutor would be hired from
the Department of Law's Juneau District Attorney's Office.
The cost would be $21,312 for a contract attorney.
Section 7 (b)
Civil Division, Oil, Gas and Mining
Legal costs for work related to the state gas pipeline
and to bringing North Slope natural gas to market, and
other oil and gas projects for FY05 and FY06.
9,000.0
In response to a question by Representative Croft, Mr.
Marquez noted that the request is needed in the
supplemental. The work for the Natural Gas Pipeline would be
mostly for outside council. There are three firms assisting
the state of Alaska. He estimated that current funding would
run out in March or April.
Representative Croft observed that some of the request was
not needed for the proposed pipeline and asked for
additional information demonstrating that the entire amount
was needed in the supplemental.
3:27:37 PM
Section 12 (b) Tax Division
Increased tobacco tax enforcement costs for the Tobacco
Tax legislation passed as ch. 1, FSSLA 2004.
CHERYL FRASCA, DIRECTOR, DIVISION OF MANAGEMENT & BUDGET,
OFFICE OF THE GOVERNOR, explained that Section 12 (b)
relates to Denali Commission funding for the Fairbanks
Detoxification Center. The state authorization of the
federal funds was given to the Department of Health and
Social Services, but the Denali Commission appropriated the
funds to the Mental Health Trust Authority because they were
the original recipient of the federal funds.
SUSAN TAYLOR, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF REVENUE, explained that the Denali Commission
granted the funds to the Alaska Mental Health Trust
Authority. The Administration was unable to change the grant
to the Department of Health and Social Services, where the
legislature had appropriated the funds. The funds need to be
spent by September 30, 2005.
Section 7 (a)
Vice-Chair Stoltze asked about corporate receipts in Section
7 (a). Ms. Frasca acknowledged that the Legislature has
used corporate receipts in previous years for oil and gas
litigation and other related matters. She did not know what
the Governor would decide regarding their use.
3:31:33 PM
Section 6 (c)
Representative Croft asked for more information regarding
expenditures from the Information Services Fund. He noted
that purchases would be consolidated into a master line of
credit, which would make sense, as long as the costs were
charged back to individual departments. He worried that the
debt would be paid out of general funds, which would go
around the GO bond process. He questioned if state debt
would be borrowed through the master credit card line.
Ms. Frasca stressed that it is a financing mechanism, which
has been used over the years.
JOAN BROWN, CHIEF BUDGET ANALYST, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR, explained that the Division
of Elections, Accuvote system was purchased in this manner.
Ms. Frasca added that the intent was to charge out to the
departments and capture federal funds over time. She
emphasized that they were attempting to lower general fund
spending.
Representative Croft thought that the total amount would be
$37 million dollars. Ms. Frasca noted that there was
another $20 million dollars in the capital budget for their
payroll system replacement. The Administration has not
decided how to proceed, but the intent is to charge out to
those that get payroll checks issued, which would allow them
to capture some non-general fund, fund sources to be paid
over time.
Representative Croft reiterated his estimate that there had
been a total of $37 million dollars used in this type of
debt financing. Ms. Frasca summarized that there was a
total of $17 million in information technology (IT) capital
projects and $20 million from the payroll system.
Section 6 (a)
Representative Hawker referred to Section 6(a), fuel
increases for the Alaska Marine Highway System. He observed
that $10 million dollars were allocated for fuel costs in
the FY06 budget, while the expected cost is $16 million
dollars. He questioned if the additional money should be
contained in the "whole" budget and not be brought back as a
supplement. Ms. Frasca explained that they did not know if
the high prices would continue when the budget was put
together in September 2004. She did not know if it was
appropriate to proceed with a FY06 budget amendment.
SB 98 was HELD in Committee for further consideration.
3:38:03 PM
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