Legislature(2019 - 2020)ADAMS ROOM 519

02/28/2019 01:30 PM FINANCE

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Audio Topic
01:34:44 PM Start
01:35:39 PM HB39 || HB40
01:36:00 PM Fy 20 Budget Overview: Department of Administration
02:05:30 PM Fy 20 Budget Overview: Office of the Governor
02:38:19 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ FY20 Dept. Budget Overviews: TELECONFERENCED
- Dept. of Administration
- Office of the Governor
HOUSE BILL NO. 39                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;  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."                                                                                                    
HOUSE BILL NO. 40                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive   mental    health   program,   including                                                                    
     supplemental  appropriations;  and   providing  for  an                                                                    
     effective date."                                                                                                           
1:35:39 PM                                                                                                                    
^FY 20 BUDGET OVERVIEW: DEPARTMENT OF ADMINISTRATION                                                                          
1:36:00 PM                                                                                                                    
CHERYL   LOWENSTEIN,   ADMINISTRATIVE   SERVICES   DIRECTOR,                                                                    
DEPARTMENT  OF  ADMINISTRATION,  OFFICE  OF  MANAGEMENT  AND                                                                    
BUDGET,  OFFICE OF  THE  GOVERNOR,  introduced a  PowerPoint                                                                    
presentation  titled  "FY2020   Governor's  Amended  Budget"                                                                    
dated February 28,  2019 (copy on file). She  began on slide                                                                    
3  and  reported  that the  Department  of  Administration's                                                                    
(DOA)  total  budget  in  FY 19  was  $343,978,500  and  the                                                                    
governor's  proposed  FY  20  budget  was  $374,977,200  (an                                                                    
increase  of $30,998,700).  She  referenced a  chart on  the                                                                    
left showing a  funding comparison. Federal funds  made up a                                                                    
small  portion of  the  department's  budget, totaling  just                                                                    
over $3.9  million in FY 19  and $4.1 million in  FY 20. The                                                                    
$200,000 (5 percent)  increase was for a  six-year grant for                                                                    
the Office  of Public Advocacy  (OPA) to address  the opioid                                                                    
Ms. Lowenstein  moved to the  "other" funds  category (shown                                                                    
in green) that was comprised  of large buckets of funds. The                                                                    
first  was   interagency  (IA)  receipts  to   charge  other                                                                    
agencies  for  DOA's  service.   She  noted  the  difference                                                                    
between  FY 19  and  FY 20  was minimal  at  a reduction  of                                                                    
Ms.  Lowenstein reported  that the  second item  included in                                                                    
other funds was the  Internal Services Fund used exclusively                                                                    
by  the  Office  of Information  Technology,  which  totaled                                                                    
$47,491,000  in  FY  19  and   $74,169,000  in  FY  20.  She                                                                    
elaborated that the increase was  just under $20 million and                                                                    
was due  to the  integration of information  technology (IT)                                                                    
services.  Some  contracts  had  been  consolidated  in  the                                                                    
Office  of  Information  Technology (OIT);  those  contracts                                                                    
were paid  in OIT  and services  were provided  to agencies,                                                                    
rather than agencies paying the  costs directly (DOA charged                                                                    
the  cost  back to  the  agencies).  She highlighted  a  $15                                                                    
million  supplemental in  FY  19 for  the  same reason.  She                                                                    
reported   the   expectation    of   86   additional   staff                                                                    
transferring   into  OIT   in   FY  20   as   part  of   the                                                                    
consolidation. The  third large consumer of  other funds was                                                                    
the Public Building Fund, which  had a minimal difference of                                                                    
$500  between  FY 19  and  FY  20.  She explained  that  the                                                                    
department used  the funds to  charge agencies for  space in                                                                    
DOA-owned state buildings.                                                                                                      
1:39:31 PM                                                                                                                    
Vice-Chair Ortiz asked if Ms.  Lowenstein was describing the                                                                    
difference between other funds in  the FY 19 management plan                                                                    
and governor's  amended budget for  FY 20  ($234,578,000 and                                                                    
$269,571,900 respectively).                                                                                                     
Ms. Lowenstein replied in the affirmative.                                                                                      
Vice-Chair  Ortiz  asked  if  it was  possible  to  see  the                                                                    
specific  line item  changes rather  than receiving  an oral                                                                    
Ms. Lowenstein responded affirmatively.                                                                                         
LACEY  SANDERS, BUDGET  DIRECTOR, OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET, OFFICE OF THE GOVERNOR,  noted that the details were                                                                    
included in  the subcommittee budget  books provided  by the                                                                    
Legislative  Finance   Division.  She  explained   that  Ms.                                                                    
Lowenstein  was  providing  a  high-level  overview  of  the                                                                    
Co-Chair  Wilson referenced  Shared Services  and noted  the                                                                    
legislature had  heard there  would be  substantial savings.                                                                    
She remarked  there were substantial  funds moving  back and                                                                    
forth via  interagency receipts  and internal  services. She                                                                    
asked  how legislators  could determine  how much  money had                                                                    
been spent in all of  the different agencies compared to the                                                                    
amount  spent on  the  current  consolidated structure.  She                                                                    
wondered if the transition was nearly finished.                                                                                 
Ms. Lowenstein  responded that DOA had  done some baselining                                                                    
of costs for OIT and  Shared Services. She highlighted costs                                                                    
in personal services, contractual,  travel, and other lines.                                                                    
The department was  in the process of bringing  staff in and                                                                    
looking  at purchases  done  across agencies  independently.                                                                    
She  explained there  was an  Investment Review  Board (IRB)                                                                    
where every  contract or software  purchase was  reviewed in                                                                    
order to see  what people were using and  whether items were                                                                    
used by one  or several departments. The idea  was to locate                                                                    
areas the  department could  consolidate prices  or services                                                                    
for  a  cheaper cost.  She  detailed  that the  process  was                                                                    
currently underway  as DOA  transferred staff  in to  DOA to                                                                    
provide the same services they  had received. There had been                                                                    
some  savings to  date, but  some savings  would need  to be                                                                    
reinvested to  improve IT  services (e.g.  in areas  like IT                                                                    
security,  which  needed  improvement). In  the  future  she                                                                    
anticipated the savings.                                                                                                        
1:42:43 PM                                                                                                                    
Co-Chair Wilson  understood that aside from  Shared Services                                                                    
the  administration  was  doing some  other  cost  effective                                                                    
measures.   She   believed   several   years   earlier   the                                                                    
consolidation  only  pertained  to   IT.  She  asked  for  a                                                                    
breakdown of  all of the  measures. She had heard  the state                                                                    
had  not received  the savings  it  anticipated with  Shared                                                                    
Services and  that it may  have resulted in  less efficiency                                                                    
in some  agencies. She believed  it was separate  from other                                                                    
measures aiming to purchase everything  at the same place in                                                                    
Ms. Lowenstein answered that Shared  Services was the travel                                                                    
and  payables initiative,  which  included procurement.  She                                                                    
detailed that  OIT was the  IT consolidation, which  was not                                                                    
included under the Shared  Services category. The department                                                                    
had brought in most of  the travel under Shared Services but                                                                    
had left  out confidential travel; once  a confidential unit                                                                    
had  been   established  it   could  consider   bringing  in                                                                    
confidential  travel.  The priority  had  been  to bring  in                                                                    
regular travel. The department had  been given staff that it                                                                    
paid and  issued a  chargeback for.  The department  had not                                                                    
been given  overhead; it  was finding  receipts and  fees to                                                                    
offset the costs for the initiative.                                                                                            
Ms.  Lowenstein  continued that  DOA  had  recently made  an                                                                    
investment in  software to improve  tracking of what  it was                                                                    
receiving (it  had used email  in the past).  The department                                                                    
was implementing  a new process  to reduce the time  it took                                                                    
to  process   travel  by   approximately  40   percent.  She                                                                    
elaborated  that   DOA  was  starting   to  gain   and  find                                                                    
efficiencies  to reduce  its staff  time  and hopefully  the                                                                    
number of  staff needed  in the  future. The  department was                                                                    
also  beginning to  bring the  payables  initiative in.  She                                                                    
relayed  that  DOA  was  still  doing  significant  work  to                                                                    
consolidate those components.                                                                                                   
1:45:17 PM                                                                                                                    
Co-Chair Wilson  surmised that the efficiencies  were not as                                                                    
basic  as  the  initial   project  she  was  recalling.  She                                                                    
remarked  on the  difficulty of  following IA  receipts. She                                                                    
asked  if   the  employees   would  eventually   become  DOA                                                                    
employees, which  would eliminate  the need  for chargebacks                                                                    
[to  other  agencies].  She  thought  it  would  remove  the                                                                    
duplication processes related to funding.                                                                                       
Ms.  Lowenstein   replied  that  if  DOA   was  100  percent                                                                    
successful, the only way it  could abolish IA receipts would                                                                    
be if  it was  able to  find enough  receipts to  not charge                                                                    
anything back for the service provided.                                                                                         
1:46:21 PM                                                                                                                    
Ms.  Lowenstein  continued  to   address  the  "other"  fund                                                                    
category on  slide 3. The second  to last large item  in the                                                                    
category was the department's  retirement and benefit funds.                                                                    
The   budget   included  an   increase   in   the  area   of                                                                    
approximately   $7.6  million.   She  detailed   the  amount                                                                    
included $3.7  million for the  second half of  the employer                                                                    
group waiver  program that was  adding Medicare Part  D. She                                                                    
explained the  department had pharmaceutical rebates  in the                                                                    
past; adding Medicare  Part D would increase  rebates by $16                                                                    
million  to  $23  million. Additionally,  the  change  would                                                                    
reduce the state  assistance by $40 million  to $52 million.                                                                    
The department had  put a number of contracts  in place that                                                                    
would result  in savings  of as  much as  $4 million  on the                                                                    
active  side; once  the contracts  were  farther along,  DOA                                                                    
could look  at adding retirees,  which would result  in more                                                                    
savings. She  elaborated that  the savings  would go  to the                                                                    
AlaskaCare Health Trust.                                                                                                        
Ms.  Lowenstein addressed  the last  large item  included in                                                                    
the  "other" funds  category representing  a  change in  the                                                                    
chart  was an  increase of  $851,000 to  the Violent  Crimes                                                                    
Compensation Board funding (crime  victim funds sourced from                                                                    
the  Permanent Fund  Dividends garnished  from felons).  She                                                                    
noted that HB 286 passed  the legislature the previous year,                                                                    
which  increased the  board's ability  to receive  and spend                                                                    
receipts  of $180,000.  She expounded  that  the higher  the                                                                    
amount  of  the  increase,  the  more  money  there  was  to                                                                    
distribute across the agencies receiving funding.                                                                               
Vice-Chair Johnston asked about  the Medicare Part D related                                                                    
to pharmaceuticals.  She asked  whether the savings  was due                                                                    
to  a decrease  in the  cost of  drugs or  from the  upfront                                                                    
Ms.  Lowenstein replied  that the  state was  receiving more                                                                    
revenues off  the pharmaceuticals consumed by  the people in                                                                    
the health  trust. She  added that  the state  was receiving                                                                    
$0.30 instead of $0.10.                                                                                                         
Vice-Chair Johnston  asked for  verification the  cash would                                                                    
be received  immediately instead  of after  120 days  as was                                                                    
the current practice.                                                                                                           
Ms. Lowenstein  replied in the affirmative.  She highlighted                                                                    
that the department's projections  were low compared to what                                                                    
it was anticipating  to collect; the amount  was expected to                                                                    
be a bit higher than what she had previously stated.                                                                            
1:49:11 PM                                                                                                                    
Representative  Sullivan-Leonard asked  if the  cost savings                                                                    
would come from  the new contract with  the pharmacy benefit                                                                    
Ms. Lowenstein  replied the savings  would come in  the form                                                                    
of federal reimbursement by adding Medicare Part D.                                                                             
Representative   Sullivan-Leonard   surmised  her   previous                                                                    
statement was not part of it.                                                                                                   
Ms. Lowenstein agreed.                                                                                                          
Ms. Lowenstein  continued to address  slide 3.  The increase                                                                    
in other funds  from FY 19 to FY 20  was almost entirely due                                                                    
to  the Internal  Services Fund  for  OIT in  the amount  of                                                                    
$26.7 million, retirement and benefits  at $7.6 million, and                                                                    
the Violent Crimes Compensation  Board at $800,000. The blue                                                                    
portion of  the bar [in  the chart on the  left] represented                                                                    
the  department's   undesignated  general  fund   (UGF)  and                                                                    
designated  general  funds  (DGF).   In  FY  19,  the  total                                                                    
$105,495,500 was made up of  $72,517,000 UGF and $32,977,800                                                                    
DGF.  In  FY 20,  the  total  $101,300,000  was made  up  of                                                                    
$68,307,100  UGF   and  $32,992,900  DGF  (a   reduction  of                                                                    
approximately $4.2  million). The  largest consumers  of UGF                                                                    
were OPA and the Public  Defender Agency at approximately 73                                                                    
percent of the  funds in FY 20. The largest  consumer of DGF                                                                    
was the Division  of Motor Vehicles (DMV)  at $16.7 million.                                                                    
She reported  that DMV returned  $30 million to  $40 million                                                                    
annually to the General Fund.                                                                                                   
Ms. Lowenstein  moved to the chart  on the right of  slide 3                                                                    
showing DOA's  budgeted position  comparisons between  FY 19                                                                    
and FY 20.  The department had 1,245 positions in  FY 19 and                                                                    
1,263  in  FY  20.  She  noted it  was  an  increase  of  18                                                                    
positions overall. There were  19 positions increased in the                                                                    
full-time category  (shown in  blue), 15  were due  to staff                                                                    
transferring in  from the  Department of  Transportation and                                                                    
Public  Facilities   to  OIT,  6  staff   were  working  for                                                                    
retirement and  benefits (with an offset  of 3 non-permanent                                                                    
positions),  and the  administrative  services director  and                                                                    
one other position were being transferred out of DOA.                                                                           
Co-Chair Wilson  referenced Ms. Lowenstein's  testimony that                                                                    
DMV  brought in  the most  revenue.  She asked  if the  [per                                                                    
person] cost selected  to obtain a Real ID had  hit the mark                                                                    
compared to the cost of a regular driver's license.                                                                             
Ms.   Lowenstein  replied   that  she   did  not   have  the                                                                    
information and would follow up on the question.                                                                                
Co-Chair  Wilson  was  concerned  about  the  scenario  when                                                                    
someone  did  not receive  their  driver's  license [in  the                                                                    
mail] and the  DMV did not know where it  went because there                                                                    
was no tracking system. She  shared that her license had not                                                                    
arrived, and  she had  called a couple  of months  later but                                                                    
the DMV  did not know where  it had gone. She  reported that                                                                    
the FBI had subsequently found it  on a person who had taken                                                                    
licenses from numerous people. She  elaborated that the only                                                                    
offer she had received was  to get her same driver's license                                                                    
back with  the same number on  it. She wanted there  to be a                                                                    
process when someone else received  a person's license. With                                                                    
the Real  ID requirement, she  believed it was time  for the                                                                    
DMV   to  consider   tracking   mailed   licenses  or   have                                                                    
individuals pick  up their license  at the DMV. She  did not                                                                    
believe  the regular  mail kept  licenses  very secure.  She                                                                    
reported it had  not made her feel good to  know a thief had                                                                    
been carrying her  license in his pocket. She  added she had                                                                    
recently received a call from  a person who had not received                                                                    
their license in the mail and its whereabouts were unknown.                                                                     
Ms. Lowenstein thanked Co-Chair Wilson for the comment.                                                                         
1:53:39 PM                                                                                                                    
Representative  Josephson spoke  about  the  OPA and  Public                                                                    
Defender  Agency budgets.  He  thought  the Public  Defender                                                                    
Agency had  been seeking  20 more  public defenders.  He did                                                                    
not know  if it correlated  with the anticipated  passage of                                                                    
the  governor's  crime  bill  package.  Instead  of  the  20                                                                    
positions,  the agency  had received  money for  one-half to                                                                    
one full position. He asked  about the impact of passing the                                                                    
governor's  crime   package  on  Public   Defender  Agency's                                                                    
Ms. Lowenstein  answered that she  did not know  the impact.                                                                    
She  was  unsure  the administration  could  articulate  the                                                                    
impact  presently. The  Public Defender  Agency believed  it                                                                    
should be able to provide  necessary services in the current                                                                    
year. She  reported that the appeals  backlog would increase                                                                    
some. She  relayed that the  DOA commissioner  was dedicated                                                                    
to looking at  whether the agency's work  was conducted most                                                                    
efficiently and planned to act accordingly.                                                                                     
1:55:08 PM                                                                                                                    
Ms. Lowenstein  moved to  slide 4 and  spoke to  the General                                                                    
Fund changes including  the withdraw of the  state grant for                                                                    
Alaska Public Broadcasting  television, radio, and satellite                                                                    
services totaling $3,496.1 million GF and $100,000 IA.                                                                          
Vice-Chair Ortiz asked  what kind of analysis  had been done                                                                    
in  the  decision to  make  the  $3.5 million  reduction  to                                                                    
public broadcasting.                                                                                                            
Ms.  Sanders  replied  that   when  the  administration  had                                                                    
reviewed the  departments' budgets, it had  prioritized each                                                                    
department's   core   services.   The   administration   had                                                                    
determined that  the grant was not  statutorily required and                                                                    
was not a core service.                                                                                                         
Vice-Chair Ortiz asked  if the presenters were  aware of the                                                                    
role  public   broadcasting  played  in   rural  communities                                                                    
including emergency information broadcasting.                                                                                   
Ms. Lowenstein replied in the affirmative.                                                                                      
Vice-Chair  Ortiz asked  if  the  department had  determined                                                                    
that the emergency contact services were not essential.                                                                         
Ms. Sanders  clarified that  the decision  had been  made by                                                                    
the governor, not Ms. Lowenstein.                                                                                               
Vice-Chair Ortiz  understood, but noted that  Ms. Lowenstein                                                                    
was the representative of the  governor. He asked whether it                                                                    
was   deemed    that   emergency    broadcasting   services,                                                                    
particularly in rural Alaska, were not essential.                                                                               
Ms. Sanders replied  that the services may  be essential for                                                                    
communities.   She  suggested   that  entities   could  look                                                                    
elsewhere for  funding if  they chose to  do so.  She stated                                                                    
that  the funding  had been  identified as  nonessential for                                                                    
the core functions provided by DOA.                                                                                             
1:58:21 PM                                                                                                                    
Representative  Sullivan-Leonard noted  the particular  item                                                                    
had been looked at for  reduction for years. She stated that                                                                    
there  had been  ongoing discussions  about other  potential                                                                    
funding sources at  the local or tribal level.  She asked if                                                                    
other avenues  had been explored and  whether local entities                                                                    
had been asked if they could help provide support.                                                                              
Ms. Lowenstein answered that DOA  distributed the grants and                                                                    
public  broadcasting  was   responsible  for  providing  the                                                                    
department with  a list  of recipients  and the  amount they                                                                    
received. She  reported DOA would  be glad to help  with the                                                                    
transition in any way possible.  She confirmed that the idea                                                                    
was  for public  broadcasting to  locate funding  from other                                                                    
Representative  Sullivan-Leonard  appreciated the  response.                                                                    
She  was hearing  more and  more  about the  impacts at  the                                                                    
local level. She supported  continuing discussions to assist                                                                    
entities on the receiving end find other funding sources.                                                                       
Co-Chair Foster  asked for a  list of all the  grantees from                                                                    
the past year.                                                                                                                  
Ms. Sanders agreed to provide the list.                                                                                         
Vice-Chair Ortiz  asked if the  funding was  associated with                                                                    
any  federal matching  funds from  National Public  Radio or                                                                    
Ms.  Sanders  was  uncertain  and would  follow  up  on  the                                                                    
Ms.  Lowenstein believed  there was  some match  funding for                                                                    
public  radio  in  particular.   She  believed  the  funding                                                                    
represented 12 percent of the radio's overall funding.                                                                          
Vice-Chair  Ortiz asked  for  clarification  that the  money                                                                    
represented some match potential  for the radio stations. He                                                                    
surmised  that the  opportunity cost  was greater  than $3.5                                                                    
million because the federal funding would not come in.                                                                          
Ms. Lowenstein answered in the affirmative.                                                                                     
Co-Chair  Wilson  asked  if entities  filled  out  paperwork                                                                    
showing other fund  sources when they applied  for the state                                                                    
grants.  She  did not  believe  it  was necessarily  federal                                                                    
funding  that required  a match  (it  may or  may not).  She                                                                    
relayed  it would  be  helpful to  see  the overall  funding                                                                    
picture [for  public broadcasting].  She believed  the funds                                                                    
represented  a low  percentage [of  overall funds]  for some                                                                    
entities and  a high percentage  for entities in  some rural                                                                    
areas. She  noted that  not all  federal funding  required a                                                                    
match;  sometimes funds  were received  because  of what  an                                                                    
organization was  doing. Additionally,  some of  the funding                                                                    
could be coming from  communities or Native corporations. It                                                                    
would  be  difficult  for   legislators  to  understand  the                                                                    
impacts without the entire picture.                                                                                             
Ms. Lowenstein replied that it  was accurate. She noted that                                                                    
if an entity  was using state funds for a  match, they could                                                                    
use donations for a match  instead. There were numerous ways                                                                    
to look at the issue.                                                                                                           
2:02:42 PM                                                                                                                    
Ms.  Lowenstein  addressed  a  statewide  support  executive                                                                    
branch 50 percent  travel reduction of $459,100  GF on slide                                                                    
4 ($289,200  UGF and $169,900  DGF). The total  reduction to                                                                    
the department was $592,700.                                                                                                    
Vice-Chair  Ortiz  asked  how  the  reduction  impacted  the                                                                    
department's  ability to  conduct carry  out its  duties and                                                                    
obligations. He recognized that  reducing travel appeared to                                                                    
be a  good thing at face  value; however, he wondered  if it                                                                    
would have  a specific  impact on  DOA's ability  to fulfill                                                                    
its duties.                                                                                                                     
Ms.  Lowenstein answered  that OPA  and the  Public Defender                                                                    
Agency did not receive a 50  percent cut because of the work                                                                    
the  two   agencies  did.  She   could  not  speak   to  the                                                                    
calculation, but  the agencies had received  the same number                                                                    
as  the  Department of  Law  and  the Department  of  Public                                                                    
Safety.  The  department's  commissioner was  reviewing  all                                                                    
travel and  denying anything that was  not mission critical.                                                                    
The department  was looking at  increasing videoconferencing                                                                    
to help reduce travel at DOA and in other agencies.                                                                             
2:04:48 PM                                                                                                                    
Vice-Chair Johnston  asked if Ms. Lowenstein  had identified                                                                    
the Alaska  Oil and  Gas Conservation Commission  (AOGCC) as                                                                    
an agency receiving a [travel] reduction.                                                                                       
Ms. Lowenstein  replied that  AOGCC had  also received  a 50                                                                    
percent travel reduction.                                                                                                       
^FY 20 BUDGET OVERVIEW: OFFICE OF THE GOVERNOR                                                                                
2:05:30 PM                                                                                                                    
SHAWN  HENDERSON, ADMINISTRATIVE  SERVICES DIRECTOR,  OFFICE                                                                    
OF THE GOVERNOR, provided a  brief summary of the operations                                                                    
of the Office  of the Governor. He detailed  that the office                                                                    
exercised executive power of the  State of Alaska as set out                                                                    
in  the  Alaska  Constitution  and in  statute.  The  office                                                                    
included  the   Office  of  the  Lieutenant   Governor;  the                                                                    
Division of  Elections responsible for  overseeing statewide                                                                    
elections; the  Alaska Human  Rights Commission  tasked with                                                                    
enforcing  Alaska  human  rights  laws; and  the  Office  of                                                                    
Management  and Budget  (OMB) that  oversaw the  preparation                                                                    
and presentation of the governor's budget.                                                                                      
Mr. Henderson  continued with the presentation  above titled                                                                    
"FY2020 Governor's  Amended Budget" dated February  28, 2019                                                                    
(copy  on file).  He began  on slide  6 showing  funding and                                                                    
budgeted  position  comparisons.  He  pointed  to  the  left                                                                    
portion of the slide and  reported that the total budget for                                                                    
the  Office of  the  Governor was  increasing slightly  from                                                                    
$28,850,000 to  $28,961,000. He detailed  that there  was GF                                                                    
reduction from  $27,781,700 to $24,747,600 (shown  in blue).                                                                    
Other  funds  increased  from  $838,300  to  $3,984,700.  He                                                                    
reported that details on the  increase would be shown on the                                                                    
following slide.  Federal funds were reduced  by $1,000 from                                                                    
FY 19 to FY 20.                                                                                                                 
Mr. Henderson  directed attention  to the  budgeted position                                                                    
comparison  on the  right side  of the  slide. There  was no                                                                    
change  in  the  23 nonpermanent  positions.  The  full-time                                                                    
positions would increase from 136 to 154.                                                                                       
2:09:20 PM                                                                                                                    
Mr.  Henderson  turned to  slide  7  and addressed  detailed                                                                    
changes in  the budget. The governor's  office was proposing                                                                    
to reduce its contingency fund  by $300,000 GF. The fund was                                                                    
originally  $550,000   and  the  reduction  would   leave  a                                                                    
remaining balance  of $250,000. He  noted the item  had been                                                                    
discussed the  previous year and  he believed  the reduction                                                                    
represented  a  move  in the  right  direction.  The  second                                                                    
bullet  highlighted  the   consolidation  of  administrative                                                                    
services   director   (ASD)   positions  moving   from   the                                                                    
departments  to  OMB. The  cost  was  $2,706,000, which  was                                                                    
funded  by  Interagency  (IA)   receipts.  The  last  bullet                                                                    
reflected  the decrease  in executive  branch  travel by  50                                                                    
percent totaling $618,700 GF.                                                                                                   
Vice-Chair Johnston  asked where  the 13 positions  had come                                                                    
from [listed in the second bullet point on the slide].                                                                          
Ms. Sanders  replied that the  13 positions  represented the                                                                    
ASDs   being  transferred   into  OMB   from  each   of  the                                                                    
Co-Chair Wilson noted slide 6  showed a position increase of                                                                    
18. She asked for detail on the additional 5 positions.                                                                         
Mr. Henderson explained that 13  of the positions were ASDs,                                                                    
3 positions were from the  Economic Development Council, and                                                                    
2  positions  were from  the  Department  of Fish  and  Game                                                                    
2:12:33 PM                                                                                                                    
Co-Chair  Wilson asked  why  the  administration was  moving                                                                    
vehicle rental tax  to pay for the positions  (as opposed to                                                                    
UGF). She  asked what  the two positions  from DFG  were and                                                                    
why they were being moved.                                                                                                      
Ms. Sanders responded that the  governor's budget included a                                                                    
transfer   of  economic   development  functions   from  the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
(DCCED),  including  three   positions  and  the  associated                                                                    
funding, to  the Office  of the  Governor. There  were other                                                                    
functions  that had  been included  in  DCCED's Division  of                                                                    
Economic  Development, which  would  be  transferred to  the                                                                    
Division of  Community and  Regional Affairs.  She explained                                                                    
that the  functions of the Division  of Economic Development                                                                    
would be  transferred from the  division. The  DFG positions                                                                    
proposed  for transfer  to the  governor's  office were  two                                                                    
division director  positions that were vacant  and no longer                                                                    
being  utilized in  the department.  She  detailed that  the                                                                    
services and work being done  by the Division of Habitat and                                                                    
Division of  Subsistence would  continue, but  the positions                                                                    
had been identified as no longer necessary.                                                                                     
Co-Chair Wilson  expressed concern  about the  proposal. She                                                                    
wondered why the administration had  not opted to delete the                                                                    
positions from  DFG if  they were no  longer needed  and add                                                                    
two  new  positions  to  the Office  of  the  Governor.  She                                                                    
wondered if  the governor  was going  to be  doing something                                                                    
different than before.  She asked why the  vacancy could not                                                                    
be utilized.                                                                                                                    
Ms.  Sanders replied  that there  were multiple  ways to  do                                                                    
budget  transactions. She  explained that  an increment  and                                                                    
decrement  could   have  been  utilized.  Under   the  given                                                                    
scenario,  there were  two division  director positions  and                                                                    
associated  funding  available.   She  elaborated  that  the                                                                    
positions were no longer needed in  DFG and there was a need                                                                    
in the  Office of  the Governor;  therefore, a  transfer had                                                                    
been proposed.                                                                                                                  
Co-Chair Wilson  was trying  to figure out  why the  two new                                                                    
positions  were  necessary.   Additionally,  she  asked  why                                                                    
$108,000 had  been taken  from the  vehicle rental  tax. She                                                                    
did not believe  it was necessarily the right  place to take                                                                    
funding from.                                                                                                                   
2:15:29 PM                                                                                                                    
Ms. Sanders answered  that the two new  positions included a                                                                    
budget  director   and  deputy  director  within   OMB.  She                                                                    
elaborated that  OMB was consolidating  ASDs and  creating a                                                                    
new  way  of  functioning.   The  change  required  two  new                                                                    
positions.  She explained  that the  two positions  had been                                                                    
identified as  available and  were transferred.  The vehicle                                                                    
rental taxes  were appropriated to the  Division of Economic                                                                    
Development  to work  on  tourism  related functions  within                                                                    
DCCED. The  functions were no  longer occurring  under DCCED                                                                    
and  had been  moved  to  the Office  of  the Governor;  the                                                                    
associated funds had been transferred with the positions.                                                                       
2:17:00 PM                                                                                                                    
Co-Chair Wilson  believed the $108,000 had  come around when                                                                    
the  department  had   Alaska  Travel  Industry  Association                                                                    
(ATIA) and  a substantial amount  of the functions.  She was                                                                    
uncertain whether all of the  functions were still occurring                                                                    
or whether the  tourism industry had taken on  the work. She                                                                    
stated  the  $108,000 may  or  may  not  be doing  the  same                                                                    
function. She  was glad the  ASDs had been  brought together                                                                    
because  removed  them  from   silos.  She  asked  for  more                                                                    
information about why the change  had been made and what the                                                                    
benefits were of the communication between the ASDs.                                                                            
Ms. Sanders answered that previously  the ASDs worked within                                                                    
their  own agencies  and  were very  focused  on what  their                                                                    
agencies  were doing  and  how they  operated.  The goal  of                                                                    
moving the positions was to  bring the knowledge together to                                                                    
determine  how business  could be  done better  as a  state.                                                                    
There  were agencies  utilizing systems  that could  benefit                                                                    
other  agencies.  She explained  that  prior  to moving  the                                                                    
positions  to  OMB,  the discussions  had  not  been  taking                                                                    
place. Through some of the  proposals on the human resources                                                                    
and procurement  consolidations, the  ASDs could  pool their                                                                    
knowledge  to discuss  what  worked and  did  not work.  The                                                                    
prior consolidations of OIT and  Shared Services were taking                                                                    
significant  time and  were  providing learning  experiences                                                                    
that   could  be   applied  to   the  human   resources  and                                                                    
procurement  consolidations   to  increase  the   speed  and                                                                    
success of the process.                                                                                                         
2:19:24 PM                                                                                                                    
Representative Knopp  was concerned about  the consolidation                                                                    
of the ASDs. He appreciated  trying to find efficiencies. He                                                                    
asked if  the current number  of ASDs would remain  the same                                                                    
over time or be reduced in the future.                                                                                          
Ms.  Sanders  responded  it  was too  soon  to  say  whether                                                                    
positions  would  be reduced.  The  budget  included the  13                                                                    
positions that had been in  the agencies. The administration                                                                    
was working with ASDs to  identify what duties and functions                                                                    
they  would continue.  The  administration  believed it  was                                                                    
important  that  ASDs  continued   to  keep  their  existing                                                                    
relationships   with  their   departments,  which   involved                                                                    
participating in conversations  within the departments (with                                                                    
commissioners,    deputy    commissioners,    and    program                                                                    
Representative Knopp stated the  ASDs had support staff when                                                                    
the positions  were under the  departments. He asked  if the                                                                    
support   staff  positions   remained   intact  inside   the                                                                    
Ms.  Sanders confirmed  that  the  support staff  positions,                                                                    
including budget analysts and  procurement staff, would stay                                                                    
within  the  departments.  The budget  only  moved  the  ASD                                                                    
2:21:40 PM                                                                                                                    
Representative Josephson asked for  verification that the 13                                                                    
positions were  now physically  embedded in  OMB and  not in                                                                    
the departments.                                                                                                                
Ms.  Sanders answered  that  the  positions were  physically                                                                    
split  between their  departments and  OMB. The  individuals                                                                    
maintained  offices within  their  departments  and OMB  was                                                                    
working on establishing space within its offices.                                                                               
Representative  Josephson   was  trying  to   determine  how                                                                    
spending  part of  their time  in their  department was  any                                                                    
different  than  it  had  been.  He  was  aware  that  every                                                                    
department  was  run  by  the   executive  branch  and  that                                                                    
commissioners  served at  the pleasure  of the  governor. He                                                                    
had heard  ASDs referred  to as  directors of  directors. He                                                                    
imagined  that  if  ASDs were  embedded  outside  their  own                                                                    
departments,  they must  be receiving  information over  the                                                                    
phone  or by  email. He  was trying  to get  a sense  of the                                                                    
cultural change  the move  represented, particularly  if the                                                                    
ASDs had two offices.                                                                                                           
Ms.  Sanders replied  that the  administration's intent  was                                                                    
for  ASDs  to  act  as   a  conduit  between  agencies.  The                                                                    
directors  would determine  the  best place  to focus  their                                                                    
time  given   the  circumstances.  The  idea   was  for  the                                                                    
directors  to be  a link  between  agencies and  OMB as  OMB                                                                    
worked  through  larger  projects, consolidations,  and  the                                                                    
budget process.  The ASDs would  determine, to  some extent,                                                                    
where they needed to be at what time.                                                                                           
2:24:33 PM                                                                                                                    
Representative Josephson  was trying to  get a sense  of the                                                                    
direction  the   governor  was  going.  For   example,  each                                                                    
departmental budget included  language where the legislature                                                                    
authorized the movement of  funds between appropriations. He                                                                    
asked if  the consolidation of  the ASD positions  under OMB                                                                    
signaled a move by the administration to consolidate power.                                                                     
Ms. Sanders  replied in  the negative.  She stated  that the                                                                    
language  Representative Josephson  was referring  to within                                                                    
each  agency  was  a  proposal   to  allow  the  departments                                                                    
(working   with  OMB   and  the   ASD  positions)   to  have                                                                    
flexibility  to move  money  between  appropriations as  the                                                                    
administration  was   making  large   reductions  throughout                                                                    
departments.  She  communicated  that  the  change  was  not                                                                    
intended to be a power shift.  The language had been used in                                                                    
prior years,  specifically in the  Department of  Health and                                                                    
Social Services (DHSS) when large  reductions had been made.                                                                    
She communicated it  had been a proposal to be  able to have                                                                    
flexibility as  large reductions were being  made throughout                                                                    
the state.                                                                                                                      
2:26:12 PM                                                                                                                    
Vice-Chair  Ortiz  asked  how bringing  the  ASDs  into  the                                                                    
governor's  office had  impacted the  role of  the different                                                                    
Ms.  Sanders  answered  that  she did  not  believe  it  had                                                                    
changed  the   role  of  the  ASDs   or  commissioners.  She                                                                    
elaborated  that  the commissioners,  deputy  commissioners,                                                                    
program directors,  and ASDs were  all participating  in the                                                                    
conversations about  the budget and the  operations of their                                                                    
departments. She stated that nothing had changed.                                                                               
Vice-Chair   Ortiz    highlighted   the   [administration's]                                                                    
decision  related  to education  funding  and  asked if  Ms.                                                                    
Sanders  was saying  the Department  of Education  and Early                                                                    
Development (DEED) commissioner had been on board.                                                                              
Ms. Sanders answered  that the commissioner had  been a part                                                                    
of the conversation and decisions.                                                                                              
Vice-Chair  Ortiz stated  that the  impact of  the decisions                                                                    
had a direct  influence on policy and the  goal of improving                                                                    
education. He  asked if the  decision to reduce  funding for                                                                    
the Base Student Allocation (BSA)  was a decision to improve                                                                    
education.   He  remarked   that   the  job   of  the   DEED                                                                    
commissioner was ultimately to improve education.                                                                               
2:29:04 PM                                                                                                                    
Ms. Sanders did not know  how to answer the question because                                                                    
she believed it may not be  appropriate for her to speak to.                                                                    
The job  of the DEED  commissioner was to  support education                                                                    
and find the best outcomes  for the department. The decision                                                                    
referenced  by Vice-Chair  Ortiz  was a  budget decision  to                                                                    
reduce  the amount  of funding  that went  out through  K-12                                                                    
education. She reported that the  commissioner had been part                                                                    
of the conversation.                                                                                                            
Vice-Chair  Johnston  stated  that   she  had  been  looking                                                                    
forward to program  budgeting from OMB. She  asked if "this"                                                                    
was going  to provide the  avenue to start  seeing budgeting                                                                    
through programs.                                                                                                               
Ms. Sanders  replied that OMB had  produced priority program                                                                    
matrixes  for  each  of  the  departments,  which  would  be                                                                    
provided to  committee members. She  detailed that  when the                                                                    
budget  had been  developed, OMB  had utilized  the priority                                                                    
programs and core services.                                                                                                     
Vice-Chair Johnston  clarified she was looking  for a budget                                                                    
based  on programs.  For example,  there  were programs  for                                                                    
ages zero  to five  that were  in multiple  departments. She                                                                    
asked if the approach had started.                                                                                              
Ms. Sanders  replied in the  negative. The budget  was based                                                                    
on    individual    departments'    core    services.    The                                                                    
administration  was looking  at how  programs were  impacted                                                                    
across agencies.  She highlighted  requested IT  projects as                                                                    
an  example.  She  explained  that  the  administration  was                                                                    
making sure that capital projects  were a coordinated effort                                                                    
if they impacted multiple agencies  in any way (in order for                                                                    
the software or system could be utilized across agencies).                                                                      
2:31:29 PM                                                                                                                    
Vice-Chair  Johnston asked  if  the two  DFG positions  were                                                                    
funded through receipts or DGF.                                                                                                 
Ms. Sanders replied the positions  were funded with UGF, not                                                                    
Co-Chair  Foster asked  if there  was anything  further from                                                                    
Mr. Henderson.                                                                                                                  
Mr. Henderson replied in the negative.                                                                                          
Representative Knopp saw a  substantial increase in services                                                                    
in the OMB budget. He asked what services fell under OMB.                                                                       
Ms. Sanders replied that when  the 13 ASD positions had been                                                                    
transferred  from  their agencies,  OMB  had  also added  IA                                                                    
receipt authority  to address  their services  costs related                                                                    
to computers, IT, and travel.                                                                                                   
Representative  Knopp asked  if travel  was a  separate line                                                                    
Ms. Sanders answered in the affirmative.                                                                                        
2:33:22 PM                                                                                                                    
Co-Chair  Wilson   communicated  her  desire  to   have  the                                                                    
commissioners  online  during  the budget  discussions.  She                                                                    
wanted to hear  from the individuals who would  have to take                                                                    
the numbers  and make  them a reality.  She stated  that the                                                                    
public  did not  get to  hear when  questions were  answered                                                                    
with  an  email.  She  believed   it  would  be  helpful  in                                                                    
understanding what the decreases may or may not do.                                                                             
Co-Chair   Foster  stated   the  preference   was  to   have                                                                    
individuals  available  in  person,  but  if  that  was  not                                                                    
possible, they could be online.                                                                                                 
Representative  Josephson shared  the  request. He  reported                                                                    
that the Senate had also made the request.                                                                                      
Representative  Knopp   considered  the   budget  comparison                                                                    
between  the  December  15  versus  the  governor's  amended                                                                    
budget and the  FY 18 actuals. He remarked  that the numbers                                                                    
were somewhat skewed if the  goal was to compare the actuals                                                                    
one year  ago with  the current numbers.  He thought  it was                                                                    
necessary to look  at the far left or right  to get the true                                                                    
increase or  decrease percentages (when looking  at what was                                                                    
proposed instead of actuals).  He noted it was substantially                                                                    
different  in some  cases  [note:  Representative Knopp  was                                                                    
referencing data on the OMB website].                                                                                           
Co-Chair  Wilson asked  for clarification.  She wondered  if                                                                    
Representative Knopp was stating  that the charts were based                                                                    
on  the governor's  December 15  budget. She  corrected that                                                                    
the charts in the presentation  were to the FY 19 management                                                                    
Representative Knopp  spoke about the OMB  component detail.                                                                    
He looked  at the  numbers on  the far  right and  noted the                                                                    
percentages  included  the  governor's proposed  budget  and                                                                    
amended budget. He  wanted to see the actuals  from the past                                                                    
year compared  to the governor's  amended budget  instead of                                                                    
including the December 15 budget.                                                                                               
Co-Chair Wilson believed  Representative Knopp was referring                                                                    
to the OMB website.                                                                                                             
Representative  Knopp  confirmed  he   was  looking  at  the                                                                    
component details on the OMB website.                                                                                           
2:36:54 PM                                                                                                                    
Ms. Sanders answered that OMB and the Legislative Finance                                                                       
Division could run specific reports with comparisons upon                                                                       
Co-Chair Foster reviewed the schedule for the following                                                                         
Representative LeBon asked about the date of the following                                                                      
Co-Chair Foster replied that the following meeting was                                                                          
March 1, 2019.                                                                                                                  

Document Name Date/Time Subjects
FY2020 Gov Amend Budget to HFC 2.28.19 DOA GOV.pdf HFIN 2/28/2019 1:30:00 PM
APBC FY2019 Operating Grant Allocations.pdf HFIN 2/28/2019 1:30:00 PM
Respnse to Q's HFIN
ARCS and the Satellite Service Information.pdf HFIN 2/28/2019 1:30:00 PM
Respnse to Q's HFIN
Public Broadcasting Funding in Alaska - Impacts of 100% Reduction in Sta....pdf HFIN 2/28/2019 1:30:00 PM
Respnse to Q's HFIN
Response to House Finance Questions 2.2128.19.pdf HFIN 2/28/2019 1:30:00 PM
WWAMI fact sheet final 2018.pdf HFIN 2/28/2019 1:30:00 PM