Legislature(1993 - 1994)
03/05/1993 02:05 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 56 An Act making appropriations for operating expenses for certain programs for which the costs are derived from mandated formulas or criteria, and for expenses for certain leases and contracts for state services and operations; and providing for an effective date. Subcommittee Closeout: Department of Labor was held in Committee for further discussion. 1 DEPARTMENT OF LABOR The Department of Labor Subcommittee consists of Chair Eileen MacLean with members Representative Hudson, Representative Vezey, Representative Sitton and Representative Finkelstein. Co-Chair MacLean explained that the general fund target for the Department of Labor was $9.483 million dollars; $95.8 thousand general fund reduction from the Governor's FY 94 budget (before any budget amendments). [Attachment #1]. The subcommittee does not recommend any general fund reductions to the Department. She added, that the proposed budget which the Governor submitted for the Department for FY 94 was significantly reduced from FY 93. The Governor cut $636.8 thousand dollars or 6.2% percentage from the FY 93 authorized level. The Department was funded with eighty-four percent federal and non-general funds. Co-Chair MacLean noted her concern with the reductions already made which will effect the Department's ability to perform the statutorily required work. Past reductions are currently effecting the Department. Co-Chair MacLean listed the decrements recommended by the Governor. * Labor Market Information $100.0 thousand dollars * Commissioner's Office $54.8 thousand dollars * Worker's Compensation $85.0 thousand dollars * Wage and Hour $238.0 thousand dollars * Occupational Safety and Health $147.0 thousand dollars * Alaska Safety Advisory Council $12.0 thousand dollars Co-Chair MacLean pointed out that all increments to the Departments budget were non-general funds. The Subcommittee's recommendation is the Governor's proposed budget as amended. The Component Summary [Attachment #1] represents total funding of $57,480.2 million dollars of 2 which $9,679.6 million dollars is general funds. The targeted general fund amount is $9,483.8 million dollars and the Subcommittee recommendation is $195.8 thousand dollars over that amount. The amount is the combined result of not taking the target reduction of $95.8 thousand dollars and the Subcommittee's approval of one budget amendment from general fund program receipts. The two amendments are Employment/Unemployment Services ($100.0) and the Commissioner's Office ($4.5). The $100.0 budget amendment is general fund program receipts and would allow the Department to accept contracts from non-state agencies for special employment assistance services. Co-Chair MacLean MOVED to adoption Department of Labor's Subcommittee report and that it be incorporated into HB 55. Co-Chair Larson OBJECTED for purposes of additional information. Co-Chair MacLean provided the Committee with a copy of HB 203. [Attachment #5]. JOHN ABSHIRE, DEPUTY COMMISSIONER, DEPARTMENT OF LABOR, noted the Department's support of the Subcommittee's recommendations and asked that the House Finance Committee consider the recommendations. PAUL ARNOLDT, DIRECTOR, DIVISION OF WORKER' COMPENSATION, DEPARTMENT OF LABOR, addressed Attachment #5. This proposed bill addresses the declining State revenue and the cuts which the Division of Workers' Compensation has taken in the past. The bill recognizes the major issues facing Workers' Compensation. He provided the Committee with Attachment #4, a letter from the Workers' Compensation Board. The Board clarifies their support of a "user fee" program which would help the Division meet their current needs. HB 203 establishes a phase in process of four to five years which allows the Division's performance not to be affected by State funding. The Board is dealing with cuts, and lack of funding for investigation of uninsured employers in addressing the escalation of medical costs and other concerns which reduces the cost of Workers' compensation. Co-Chair Larson inquired how much revenue would be generated through the phase in project. Mr. Arnoldt replied the current the estimate is $585 thousand dollars for FY 94. The Board wants the funding to support the Division budget. Should there be funds generated beyond what would be required to support the discussion, the Board does not want to fund the general fund. Co-Chair Larson questioned how claims would be established. Mr. Abshire stated the insurance company would determine 3 what the individual businesses would be charged. Companies are charged based on their safety record. Co-Chair Larson thought the additional two percent impact on a small business would be too severe for the business to handle. Mr. Arnoldt countered that the State of Alaska has experienced medical costs rising $32 million dollars. The underlaying cause for the escalation is unknown. JUDY KNIGHT, DIRECTOR, DIVISION OF WORKERS' COMPENSATION, DEPARTMENT OF LABOR, responded to Representative Therriault's inquiries regarding STEP funding. She stated that the STEP Program would sunset this year and the proposed funding would reauthorize the program. The revenues from STEP originate from one tenth of one percent of employee contributions. Based on the estimate of taxable wages for FY 94, that amount would generate $108.5 thousand dollars for training grants. Ms. Knight stated that the Legislature made an appropriation of designated grants from STEP revenues to the Fairbanks Native Association. There has been concern that they need to examine their priorities and program parameters established for STEP. She added that, the Employment Security Advisory Council, which collaborated in the development of the STEP Program, is concerned and opposed to the designated grants because they dilute the number of funds available for requests. Co-Chair Larson distributed Attachment #6, a proposed one percent reduction scenario. He recommended continuing discussion of potential regulations for the Department of Labor. Subcommittee closeout will be held for a future date. (Tape Change, HFC 93-39, Side 1). PRESENTATION BY DEPARTMENT OF REVENUE - REVENUE FORECAST DARREL REXWINKEL, COMMISSIONER, DEPARTMENT OF REVENUE, provided the Committee with handouts addressing the five year average of ANS prices. [Attachment #2 & #3]. FY 92 includes $50.3 million dollars from the Exxon Valdez oil spill litigation and $25.3 million dollars for legal expense reimbursement. The FY 92 and FY 93 (through 2/19/93) amounts include administrative settlements of $83.7 million dollars and $121.3 million dollars. Administrative settlements represent collections of receivables after a request for informal hearings. Also included are receivable collections prior to a request for hearing of $97.5 million dollars. Not included in the projection are the amounts recently announced by a BP tax settlement of $630 million dollars. 4 Commissioner Rexwinkel noted the largest differences reflected in Attachment #2 & #3 result from the settlements. He distributed copies of the proposed OMB spending plan. [Attachment #7]. Representative Martin asked if the settlement costs exclude those being placed in the Permanent Fund. Commissioner Rexwinkel replied they did. Commissioner Rexwinkel referenced Attachment #3, the letter from Chuck Logsdon, Petroleum Economist, examining the five years ANS price estimate. The nominal dollar calculations are not a true average since it provides the first six months of FY 93 with a full year's weight. He emphasized that the market has been volatile and will continue to be. Representative Therriault asked if the settlement money, consisting of non-restricted general fund revenues, would place six percent into the Mental Health Trust Fund. Commissioner Rexwinkel stated yes. Representative Brown questioned if the money in the Constitutional Reserve would be subject to the six percent. Commissioner Rexwinkel stated that the Mental Health Trust Income Account would be allocated six percent of the unrestricted revenues. Although, that percentage does not come off the money in the Budget Reserve Account. MIKE GREANY, DIRECTOR, LEGISLATIVE FINANCE DIVISION, provided the Committee insight as to differences between the Department of Revenue's budget projection and that of the Legislative Finance Division. The difference would amount to between $.17 cents\per barrel and $.26 cents/per barrel. He added that last year the Legislature based the current year's budget on $16.90/barrel price. Currently, the average is over $18/per barrel price. Representative Martin asked if the balanced budget would include "windfalls". Mr. Greany replied that the FY 93 budget was based on assuming a $16.90/per barrel price. No additional windfalls would be necessary to balance this year's budget and it would be balanced on the revenue stream. He added that there is a cushion available for the remainder of the year. Representative Hanley commented that the unrestricted revenue from last year did not cover the current year's budget. Oil revenues plus additional sources covered last year's budget. Mr. Greany agreed reiterated that but additional settlement monies were not necessary to balance the budget.