Legislature(2009 - 2010)HOUSE FINANCE 519

03/19/2009 01:30 PM FINANCE


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01:38:25 PM Start
01:38:30 PM HB113
02:59:26 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 113 SUPPLEMENTAL/CAPITAL/OTHER APPROPRIATIONS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 113                                                                                                            
     "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."                                                                                                        
                                                                                                                                
1:41:14 PM                                                                                                                    
                                                                                                                                
KAREN  REHFELD, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET,                                                                   
OFFICE  OF THE  GOVERNOR,  explained the  circumstances  that                                                                   
guided drafting  of the supplemental budget.  She stated that                                                                   
a lot  has happened  in the  state that  affected the  budget                                                                   
since the  supplemental  bill was introduced  on February  3,                                                                   
2009.  The  Office  of  Budget  and  Management  released  an                                                                   
interim revenue forecast that  determined state revenues will                                                                   
be significantly  lower than what  the 2009 and  2010 budgets                                                                   
were built on. The goal for drafting  the supplemental budget                                                                   
was to achieve a reduction in  expenses for the current year.                                                                   
All  departments  went through  a  process  to find  ways  to                                                                   
reduce general  fund expenditures.  The Office  of Management                                                                   
and  Budget  also looked  at  existing  projects,  especially                                                                   
capital projects  to identify  lapsing balances  from unspent                                                                   
funds left  over after a  project is completed.  Four million                                                                   
dollars  in  lapsing  funds were  re-appropriated  for  other                                                                   
needs.  The   governor  instructed  departments   to  develop                                                                   
savings targets  and identify  ways to  save money.  The goal                                                                   
was  to find  additional reductions  of $20  million for  the                                                                   
2009 budget. The  savings targets were incorporated  into the                                                                   
supplemental  bill. The savings  realized by the  departments                                                                   
totaled $17.5 million.                                                                                                          
                                                                                                                                
1:44:59 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld spoke  to  the hiring  freeze  imposed on  state                                                                   
agencies. She  noted that specific  guidance was in  place to                                                                   
the departments.  There  is a waiver  process and  exemptions                                                                   
available  for   positions  in  public  safety   and  24-hour                                                                   
facilities.  The overall goal  is to  minimize the  draw from                                                                   
state savings to cover the 2009 budget shortfall.                                                                               
                                                                                                                                
Ms.  Rehfeld  explained  the  ratifications  section  in  the                                                                   
supplemental.  Primarily, ratifications  correct errors  when                                                                   
recording revenue.                                                                                                              
                                                                                                                                
1:46:31 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker  interjected that ratifications  shown on the                                                                   
pink   spreadsheets    [amendments   to   the    supplemental                                                                   
legislation  introduced by  the governor  on March 13,  2009]                                                                   
reflect whole numbers to the penny.                                                                                             
                                                                                                                                
1:47:12 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  requested  Ms.  Rehfeld  address  only  the                                                                   
highlights  of each  section in  the  legislation. She  noted                                                                   
that two packets of amendments  to the supplemental bill were                                                                   
                                    thth                                                                                        
previously submitted on February 24, and March 13.                                                                              
                                                                                                                                
1:50:02 PM                                                                                                                    
                                                                                                                                
Representative Austerman asked  for clarification on the $1.1                                                                   
million amendment  for the Department of  Administration. Ms.                                                                   
Rehfeld explained that on the  pink spreadsheet, page 1, line                                                                   
1, identifies  an unallocated  reduction of $1.1  million for                                                                   
the  Department  of  Administration.  The entry  on  line  3,                                                                   
$107.6 thousand  for Retirement  and Benefits is  included in                                                                   
the $1.1 million  on line 1. This was an error  that shows up                                                                   
as  a duplicate  reduction.  The  entry on  page  36, of  the                                                                   
spreadsheet,  line  202,  is  an  amendment  correcting  that                                                                   
error.                                                                                                                          
                                                                                                                                
Co-Chair Hawker  explained that  many amendment items  in the                                                                   
supplemental are  really an appendage to the  original budget                                                                   
proposal,  not an amendment.  They were  budget item  changes                                                                   
that were  discovered after the  transmittal of  the original                                                                   
supplemental bill.                                                                                                              
                                                                                                                                
1:52:21 PM                                                                                                                    
                                                                                                                                
Representative  Gara referred  to the unallocated  reductions                                                                   
in  every department.  He  asked  how these  reductions  were                                                                   
achieved. Ms.  Rehfeld explained that she asked  the agencies                                                                   
to find reductions when the FY  2010 budget was signed by the                                                                   
governor. The  Office of Management  and Budget set  a target                                                                   
of  $20  million  based  on  a  percentage  of  general  fund                                                                   
expenditures   for  personal   services  spread  across   the                                                                   
agencies. The  Department of Public Safety and  Department of                                                                   
Corrections were  exempted. Departments were asked  to devise                                                                   
plans to  identify reductions  from any  budget component  in                                                                   
their  agency.  As the  fiscal  year progressed  and  revenue                                                                   
changed, it became a priority  to implement the savings plans                                                                   
to achieve reductions.  These reductions were  built into the                                                                   
supplemental budget.                                                                                                            
                                                                                                                                
1:54:36 PM                                                                                                                    
                                                                                                                                
Representative Gara asked if all  of the agencies unallocated                                                                   
reductions have  been earmarked  for other uses.  Ms. Rehfeld                                                                   
responded  that the departments  did have  plans in  place on                                                                   
how   to  achieve   the  reductions.   She  exemplified   the                                                                   
Department  of Administration's  plan that included  managing                                                                   
their vacancies  to delay  hiring, reallocating some  general                                                                   
fund  expenditures  to  capital   fund  appropriations  where                                                                   
possible, and other measures.                                                                                                   
                                                                                                                                
1:55:32 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  interjected  that  mechanically  these  are                                                                   
reductions from  the Office of  the Commissioner who  has the                                                                   
authority  to   allocate  the  reductions   throughout  their                                                                   
agency.                                                                                                                         
                                                                                                                                
1:56:07 PM                                                                                                                    
                                                                                                                                
Representative  Gara stated  that  departments are  adjusting                                                                   
the  time it  takes to  fill vacancies  to achieve  reduction                                                                   
goals. He was concerned that OMB  was not granting waivers in                                                                   
order to maintain the savings  targets. Ms. Rehfeld explained                                                                   
that some  departments  were holding positions  vacant  for a                                                                   
period  of time to  reduce spending  as part  of their  plan.                                                                   
Half way through the fiscal year  the hiring freeze went into                                                                   
effect. The  departments now  have to seek  a wavier  to fill                                                                   
those positions.  She  believed that  the waiver process  was                                                                   
causing a  delay in  re-hiring those  positions. There  are a                                                                   
number of waiver  requests pending. The Office  of Management                                                                   
and  Budget is  expediting those  requests,  focusing on  the                                                                   
positions deemed critical by a commissioner.                                                                                    
                                                                                                                                
1:57:20 PM                                                                                                                    
                                                                                                                                
Representative  Gara  reiterated  his concern  about  keeping                                                                   
positions open  longer to reflect  savings. Ms.  Rehfeld felt                                                                   
that  commissioners were  thoughtful  when considering  these                                                                   
cost  savings  decisions. She  reminded  Representative  Gara                                                                   
that exemptions exist for critical positions.                                                                                   
                                                                                                                                
1:59:41 PM                                                                                                                    
                                                                                                                                
Ms.   Rehfeld   noted  the   item   in  the   Department   of                                                                   
Administration for the Personnel  Board on line 2, for $725.0                                                                   
thousand.  The expenditure  was reduced  by the amendment  to                                                                   
$560.8 thousand.                                                                                                                
                                                                                                                                
Representative  Gara  shared  his concern  that  the  state's                                                                   
salary  structure   is  so  low  agencies  can   not  attract                                                                   
professionals.   He    stated   that   the    Department   of                                                                   
Administration  announced  they were  going  to  do a  salary                                                                   
review. He  wondered if the  reduction will delay  the study.                                                                   
Ms.  Rehfeld   answered  that  the  salary  study   has  been                                                                   
contracted out and  is in progress. The results  are expected                                                                   
by the end of this year.                                                                                                        
                                                                                                                                
2:01:21 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld pointed  out the Department of  Correction's item                                                                   
on  line 12,  Inmate  Health  Care expenditure  for  $1.405.8                                                                   
million.  She   voiced  that   OMB  finds  it   difficult  to                                                                   
accurately  determine the  anticipated medical  needs of  the                                                                   
inmate population in order to avoid a supplemental request.                                                                     
                                                                                                                                
Ms.  Rehfeld   added  that  another  area  that   has  proved                                                                   
challenging  to estimate  is the amount  of federal  receipts                                                                   
for federal prisoners. On line  204, $1.000.0 reflects a fund                                                                   
source  change  from  general fund  expenditures  to  federal                                                                   
receipt authorization.                                                                                                          
                                                                                                                                
2:03:07 PM                                                                                                                    
Representative Kelly requested  the Department of Corrections                                                                   
explain what happened to the operating  expenses appropriated                                                                   
for the Wildwood  facility that has not yet  opened. He asked                                                                   
for a response in writing.                                                                                                      
                                                                                                                                
2:04:49 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld moved  on to the Department of  Health and Social                                                                   
Services. She noted  that the general fund reductions  in the                                                                   
areas of  Behavioral Health and  Medicaid Services  are based                                                                   
on projections  of need. Co-Chair Hawker interjected  that on                                                                   
line 24, the  $8.100.0 general fund reduction  is a reduction                                                                   
in authorizations.                                                                                                              
                                                                                                                                
2:05:28 PM                                                                                                                    
                                                                                                                                
Representative Gara  asked for clarification of  the $8,100.0                                                                   
million  reduction.  Ms.  Rehfeld   answered  that  based  on                                                                   
current  projections  and trends  the  state  won't need  the                                                                   
additional  authorization.  Co-Chair  Hawker added  that  the                                                                   
demand for Medicaid services was overestimated.                                                                                 
                                                                                                                                
Representative  Gara  wondered  if  eligibility  requirements                                                                   
were   increased  to   decrease   the  number   of   Medicaid                                                                   
recipients.  Ms. Rehfeld replied  that there  has not  been a                                                                   
change in eligibility requirements.                                                                                             
                                                                                                                                
2:07:13 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld reported  that on line 26, the  $6million request                                                                   
for  Medicaid Services  has  been withdrawn.  The  department                                                                   
indicated that those  services would not be  necessary in the                                                                   
current fiscal year.                                                                                                            
                                                                                                                                
Co-Chair  Hawker asked  about  the request  on  line 30.  Ms.                                                                   
Rehfeld  explained  that  the  $500.0  general  fund  request                                                                   
reflects the  recent license suspension  and takeover  by the                                                                   
state,  of   the  Mary  Conrad   Center  in  Anchorage.   The                                                                   
expenditure is for interim management  contract services. The                                                                   
center is a residential care facility.                                                                                          
                                                                                                                                
Representative  Gara referred  to line  29, $4,760.0  million                                                                   
unallocated  reduction  in  general   fund  expenditures.  He                                                                   
suggested that  the funds could be redirected  to underfunded                                                                   
programs  within  the  department   that  are  not  providing                                                                   
adequate  levels of  service. He  identified the  Independent                                                                   
Living  Program  within  the Office  of  Children's  Services                                                                   
(OCS) as an example.                                                                                                            
                                                                                                                                
2:10:11 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld  agreed that  funds could  be redirected  but the                                                                   
goal  of the  savings  target  was to  manage  the budget  to                                                                   
provide services, minimize the  reduction's impact, and still                                                                   
achieve some savings. Representative  Gara disagreed with the                                                                   
philosophy  of managing  a budget  just to  reach a  monetary                                                                   
goal. He  asked how  the department plans  to respond  to the                                                                   
program inadequacies he described.  Ms. Rehfeld reported that                                                                   
the  department  does  communicate inadequacies  to  OMB  and                                                                   
requests  budget increases.  The department  can not  provide                                                                   
for all services at a desired  level considering the existing                                                                   
budget  shortfalls.  The  department  will  provide  priority                                                                   
services as effectively as possible  under the current fiscal                                                                   
restraints.  Co-Chair   Hawker  acknowledged   the  political                                                                   
differences  in the  legislative and  executive branches.  He                                                                   
commended  OMB's  restraint  in   developing  a  supplemental                                                                   
budget that focuses on reductions  instead of large increases                                                                   
while maintaining critical services.                                                                                            
                                                                                                                                
2:12:41 PM                                                                                                                    
                                                                                                                                
Representative   Austerman   voiced    that   he   understood                                                                   
Representative   Gara's  concern.   He  contended   that  the                                                                   
legislature also has the ability  to decide what budget items                                                                   
are priorities.                                                                                                                 
                                                                                                                                
2:13:59 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld  did  not  address  any  budget  items  for  the                                                                   
Department  of  Labor  and  Workforce   Development  nor  the                                                                   
Department of Law. She noted that  the Department of Military                                                                   
and Veterans  Affairs  was exempt from  the savings  targets.                                                                   
The department uses very little general fund dollars.                                                                           
                                                                                                                                
Representative Gara  cited lines 32-34, detailing  Department                                                                   
of  Law   expenditure  requests   for  outside  counsel.   He                                                                   
mentioned a recent Department  of Law analysis that estimated                                                                   
a cost savings of up to 25% for  the department if more legal                                                                   
work  could be  accomplished  in house.  He  asked for  OMB's                                                                   
position on the study. Ms. Rehfeld  alluded to the Department                                                                   
of  Administration's salary  study.  She  indicated that  the                                                                   
findings will suggest that current  salaries are insufficient                                                                   
for attorneys  which accounts for their difficulty  in trying                                                                   
to fill  specialized  positions. In  addition, private  firms                                                                   
lure away experienced attorneys  from the department offering                                                                   
more  lucrative  wages.  She concluded  that  the  department                                                                   
might  always  need  to  contract  for  outside  counsel  for                                                                   
specialized   attorneys.  However,   higher  salaries   might                                                                   
achieve more of  a balance within the department  between the                                                                   
amount of in-house counsel and contracted services.                                                                             
                                                                                                                                
Co-Chair Hawker  reminded Ms. Rehfeld  that the item  on line                                                                   
33, $1,335 million request for  expertise and outside counsel                                                                   
for  Oil and  Gas Projects  has been  withdrawn in  Amendment                                                                   
221.                                                                                                                            
                                                                                                                                
2:17:05 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld  stated that  the unallocated  reduction  on line                                                                   
39,  in  the  amount of  $1,240.0  million  is  targeted  for                                                                   
personal  services   and  will   be  spread  throughout   the                                                                   
Department of Natural  Resources. She noted that  many of the                                                                   
funding increases in the various  Department of Public Safety                                                                   
components reflect  the results of the  collective bargaining                                                                   
agreement  with  the  Public   Safety  Employees  Association                                                                   
(PSEA). The  decrement on  page 7, line  56, of $1.1  million                                                                   
for Village Public Safety Officers'  (VPSO) contracts reveals                                                                   
the  departments  inability to  hire  all of  the  contracted                                                                   
positions. The funds  are included in the FY  2010 budget and                                                                   
the  commissioner has  indicated  that all  of the  positions                                                                   
will be filled in that fiscal year.                                                                                             
                                                                                                                                
2:19:35 PM                                                                                                                    
                                                                                                                                
Vice-Chair Thomas  asked why the Department of  Public Safety                                                                   
was not able to recruit and fill all of the positions.                                                                          
                                                                                                                                
2:20:07 PM                                                                                                                    
                                                                                                                                
DAN SPENCER,  DIRECTOR, DIVISION OF ADMINISTRATIVE  SERVICES,                                                                   
DEPARTMENT  OF  PUBLIC  SAFETY,  explained  that  the  hiring                                                                   
process has  not been able  to keep pace  with the  amount of                                                                   
additional  positions recently  funded. The department  added                                                                   
fifteen  new VPSO  positions.  The goal  is  to increase  the                                                                   
overall  number of VPSO  positions and  focus on  recruitment                                                                   
and  retention.  The  department  also  instituted  a  salary                                                                   
increase. In  FY 2010, the department  hopes to have  all the                                                                   
positions  filled.   Vice-Chair  Thomas  wondered   what  the                                                                   
problem  is with  recruitment  and  retention  of VPSOs.  Mr.                                                                   
Spencer answered  that the  recent salary  increase to  a $21                                                                   
per  hour   starting  salary   may  improved  retention.   In                                                                   
addition,  the department authorized  periodic pay  increases                                                                   
similar  to merit increases.  Vice-Chair  Thomas felt  that a                                                                   
deterrent in recruitment and retention  is their inability to                                                                   
carry firearms. Mr. Spencer explained  that the VPSOs are not                                                                   
certified police  officers. Their  level of training  as well                                                                   
as responsibility and liability  are significantly different.                                                                   
                                                                                                                                
2:23:46 PM                                                                                                                    
                                                                                                                                
Mr.  Spencer  added   that  the  VPSO  program   is  done  in                                                                   
partnership  with  the participating  community's  non-profit                                                                   
organizations.   The non-profit  organizations are  confident                                                                   
that  the  salary  increases  and  recruitment  efforts  will                                                                   
result in more hires.                                                                                                           
                                                                                                                                
2:24:52 PM                                                                                                                    
                                                                                                                                
Representative   Thomas   stressed   that   recruitment   and                                                                   
retention  has  been a  problem  with  the VPSO  program  for                                                                   
years.  He did  not  feel confident  that  the problems  will                                                                   
resolve any time soon.                                                                                                          
                                                                                                                                
Representative  Austerman pointed out  that only five  of the                                                                   
fourteen  villages  in  his  district   had  VPSOs.  He  also                                                                   
wondered  where  the  problem   lies.  Mr.  Spencer  was  not                                                                   
familiar with the specific issues in that district.                                                                             
                                                                                                                                
Representative  Gara   questioned  why  the   department  can                                                                   
attract  new recruits now  but was  not able  to in  past. He                                                                   
asked what will be different.  Mr. Spencer emphasized that it                                                                   
will take  time to  predict with  certainty if the  retention                                                                   
efforts are working. The department  believes they are. Newly                                                                   
instituted   salary  increases   along   with  periodic   pay                                                                   
increases  enables candidates  to look at  the position  as a                                                                   
career.    Enhanced  recruitment  efforts  are  taking  place                                                                   
around  the state,  which  also  takes time.  If  recruitment                                                                   
takes place  in an  urban area and  a qualified candidate  is                                                                   
found,  the department  will consider  moving that person  to                                                                   
the village  dependent on funding. The  department identified                                                                   
a problem with candidate selection.  Half of the recruits did                                                                   
not graduate from the academy.  Many dropped out voluntarily.                                                                   
Recruiters must do a better job  of detailing expectations of                                                                   
the candidates.  The department  has worked to  improve state                                                                   
trooper  recruitment and  all  of the  trooper positions  are                                                                   
currently  filled.  The  department  hopes to  see  the  same                                                                   
results with the VPSO program one year from now.                                                                                
                                                                                                                                
2:29:13 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  felt  that   much  focused  attention  and                                                                   
commitment  by  the  legislature   and  department  has  been                                                                   
directed  at filling  state trooper  and  VPSO positions.  He                                                                   
emphasized that  not only has  there been increased  funding,                                                                   
there  is an  on-going effort  and commitment  to fill  these                                                                   
positions.                                                                                                                      
                                                                                                                                
2:31:22 PM                                                                                                                    
                                                                                                                                
Representative  Kelly added that  the department was  doing a                                                                   
good  job improving  the  recruitment efforts  and  increased                                                                   
hiring  of  state  troopers and  VPSOs  without  the  defined                                                                   
benefit system.                                                                                                                 
                                                                                                                                
2:33:03 PM                                                                                                                    
                                                                                                                                
Mr. Spencer said he does not know  how the state's retirement                                                                   
plan  affected recruitment.  He informed  the committee  that                                                                   
the VPSO program does not offer retirement benefits.                                                                            
                                                                                                                                
2:34:10 PM                                                                                                                    
                                                                                                                                
Vice-Chair Thomas  pointed out that he only  has knowledge of                                                                   
the VPSO  program problems  in his  district. He thanked  the                                                                   
department for their endeavors to fill the positions.                                                                           
                                                                                                                                
Representative  Austerman  noted  that  on pages  36-37,  the                                                                   
Department   of   Health  and   Social   Services   amendment                                                                   
components  specify large  sums of general  fund and  federal                                                                   
fund reductions  based on the  economic stimulus  package. He                                                                   
asked  how  that  will affect  the  department's  ability  to                                                                   
provide the same services in the  FY 2010 budget. Ms. Rehfeld                                                                   
explained  that OMB requested  approval  for the increase  of                                                                   
the Medicaid  reimbursement rate  allowed under the  stimulus                                                                   
package  in   the  supplemental   and  the  FY   2010  budget                                                                   
amendments. The  benefit of the increased  reimbursement rate                                                                   
will  extend  until  the  first   quarter  of  FY  2011.  The                                                                   
reductions  listed  on  pages   36-37  reflect  the  stimulus                                                                   
funding.                                                                                                                        
                                                                                                                                
2:36:54 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker added that the  aggregate total reductions in                                                                   
the general fund  for the federal supplement  are roughly $53                                                                   
million in FY2009, $74 million  in FY2010, and $24 million in                                                                   
FY2011.  Representative  Austerman  asked when  general  fund                                                                   
money will be needed for the reimbursement rate.                                                                                
                                                                                                                                
2:37:52 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld stated  that the  department will  need to  seek                                                                   
guidance from  the federal agency for the  reimbursement rate                                                                   
projections for the last three  quarters of FY 2011. Co-Chair                                                                   
Hawker  elaborated   that  the  Federal   Medical  Assistance                                                                   
Program (for Medicaid) (FMAP)  rate fluctuates at the will of                                                                   
Congress. The actual amount would  be difficult to predict at                                                                   
this  time. He  deduced  that the  general  fund burden  will                                                                   
increase in FY 2011.                                                                                                            
                                                                                                                                
2:38:57 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld   directed  attention   to  the  Department   of                                                                   
Transportation's highlighted budget  request items reflecting                                                                   
three  bargaining  union  contracts:  Inlandboatmen's  Union;                                                                   
Masters, Mates, and Pilots; and  Marine Engineers on page 39,                                                                   
lines 226-228. She noted requests  related to commodity price                                                                   
increases and  state equipment  fleet costs. Co-Chair  Hawker                                                                   
interjected  that  $1,114.0  million   in  commodities  price                                                                   
increases reflects price fluctuations  in sand and gravel and                                                                   
winter chemicals (page 11, line 73).                                                                                            
                                                                                                                                
2:41:15 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld  continued with  a University  of Alaska  item on                                                                   
page  16,  line  86.  The  item   reflects  an  unanticipated                                                                   
workers'  compensation   claim.  She   also  pointed   out  a                                                                   
significant   utility   cost  increase   affecting   multiple                                                                   
campuses in the  amount of $1,272.0 million on  page 17, line                                                                   
87.                                                                                                                             
                                                                                                                                
2:42:40 PM                                                                                                                    
                                                                                                                                
Representative Hawker reported  that the supplemental capital                                                                   
budget items are  moved into the regular capital  budget each                                                                   
legislative  session. Ms.  Rehfeld  stated that  most of  the                                                                   
capital  budget  items  in  the   supplemental  (starting  in                                                                   
Section  3,  page  17)  are  requests   for  federal  receipt                                                                   
authority   for  highway   and  aviation   programs  in   the                                                                   
Department of Transportation.  She exemplified the request on                                                                   
line   94,   for   the   Alaska    Military   Youth   Academy                                                                   
Infrastructure  Project Improvements  for  the Department  of                                                                   
Military and Veterans  Affairs federal earmark  in the amount                                                                   
of $2,470 million.                                                                                                              
                                                                                                                                
2:44:08 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker remarked that  the federal funds came from an                                                                   
earmark.  He  did  not  think   the  governor  was  accepting                                                                   
earmarks.  Ms.   Rehfeld  replied  that  OMB   does  consider                                                                   
earmarks designated  for a priority  budget item or  that has                                                                   
gone thorough a public process.                                                                                                 
                                                                                                                                
Co-Chair Stoltze  questioned why  the Department  of Military                                                                   
and Veterans  Affairs funding for  the Youth Academy  on line                                                                   
164, is being  transferred to the Alaska Marine  Highway. Ms.                                                                   
Rehfeld  answered  that  in areas  where  OMB  requested  re-                                                                   
appropriations the  specific projects were completed  and the                                                                   
funds would have  lapsed to the general fund.  The funds were                                                                   
directly re-appropriated for other needs.                                                                                       
                                                                                                                                
2:46:23 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld referred  to page  18,  line 95;  $6 million  in                                                                   
Cruise Ship  Gambling Tax  revenues is  being used  for state                                                                   
parks  deferred maintenance.  She  announced that  it is  the                                                                   
first proposal that expends gambling tax revenue.                                                                               
                                                                                                                                
Co-Chair Hawker added that an  extensive legal evaluation has                                                                   
determined that the cruise ship  gambling tax revenue is part                                                                   
of the  general fund and available  for general use.  The tax                                                                   
revenue does not  have to be designated for  specific use. Ms                                                                   
Rehfeld affirmed.                                                                                                               
                                                                                                                                
2:47:24 PM                                                                                                                    
                                                                                                                                
Vice-Chair Thomas asked what are  the plans for deferred park                                                                   
maintenance  if this  item  is not  approved  in the  capital                                                                   
budget.  Ms.  Rehfeld  stated  that OMB  would  have  to  re-                                                                   
evaluate  the deferred  maintenance  needs. Co-Chair  Stoltze                                                                   
asked how OMB decided to expend  the gambling tax revenue for                                                                   
state parks. She explained that  OMB looked at addressing the                                                                   
state parks  deferred  maintenance needs  for the benefit  of                                                                   
all Alaskans.  Expenditures were  not limited to  the tourism                                                                   
or cruise ship industry. Co-Chair  Hawker reiterated that the                                                                   
tax revenue a is simple general fund expenditure.                                                                               
                                                                                                                                
2:50:15 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld addressed   line  229, the  Kalskag High  School                                                                   
Replacement. The school was destroyed  by fire. The $18,688.7                                                                   
million is  the state's  share of  the replacement  cost. The                                                                   
insurance proceeds will be deducted from this amount.                                                                           
                                                                                                                                
2:51:35 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld  referred to  the ratifications section  starting                                                                   
on line 192  on page 34. She explained that  fire suppression                                                                   
activity   is   an  annual   request.   The   six   remaining                                                                   
ratifications result from accounting  transaction errors. Co-                                                                   
Chair  Hawker  recommended OMB  oversee  internal  accounting                                                                   
improvements for  the agencies  involved. He felt  the errors                                                                   
were avoidable.                                                                                                                 
                                                                                                                                
2:53:28 PM                                                                                                                    
                                                                                                                                
Representative  Fairclough  remarked  that the  gambling  tax                                                                   
revenue should  not be  referenced as such  in the  budget to                                                                   
avoid  a risk  of litigation  from the  cruise industry.  The                                                                   
money is general fund dollars.                                                                                                  
                                                                                                                                
2:55:04 PM                                                                                                                    
                                                                                                                                
Representative  Crawford recalled  how  the legislature  took                                                                   
PFD's from  felons and  misdemeanants to  use the monies  for                                                                   
child support.   He emphasized that has not been  done and he                                                                   
questioned when it  would be. Ms. Rehfeld offered  to discuss                                                                   
that issue with him.                                                                                                            
                                                                                                                                
2:57:21 PM                                                                                                                    
                                                                                                                                
Representative  Austerman   cited  page  17,   line  92,  and                                                                   
remarked that the fund source  for the component is listed as                                                                   
business license  receipts. He  felt it should  be designated                                                                   
as general  funds. Co-Chair  Hawker commented  that there  is                                                                   
presently  a  statutory  construct   that  earmarks  business                                                                   
license receipts as a separate fund source.                                                                                     
                                                                                                                                
2:59:26 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker closed public testimony.                                                                                        
                                                                                                                                
HB 113 was HEARD and HELD                                                                                                       

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