Legislature(1999 - 2000)
02/16/2000 09:43 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SENATE BILL NO. 250
"An Act making and amending capital, supplemental, and
other appropriations and reappropriations; making a
reappropriation under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; making
appropriations to capitalize funds; ratifying certain
expenditures; and providing for an effective date."
Co-Chair Parnell announced that, unlike the usual practice
of having each department present their requests, the
Office of Management and Budget will present an overview of
all items. He qualified that if Committee members wish to
hear from certain departments, they could be called before
the Committee at a later date.
ANNALEE MCCONNELL, Director, Office of Management and
Budget appreciated the early attention given to this bill,
noting that there are a number of issues that would benefit
from the legislature's prompt action.
Ms. McConnell detailed how the procedures in handling the
supplemental budget had undergone significant changes in
the last six years. She stated that the emphasis is now to
try to address the majority of funding needs in the regular
budgets.
Ms. McConnell noted however, that a couple of areas have
not been dealt with in the regular budget for the past
several years. She gave an example of fire suppression
pointing out that since 1987, the legislature has not
appropriated enough money to operate the program. She
referred to earlier discussions about using five-year
averages to determine an estimated amount to appropriate
into the fund. The five-year average, excluding the highest
and lowest years is approximately $11.7 million, according
to Ms. McConnell. She stated that the supplemental request
is for $6.4 million to cover fires that already occurred
since the start of the fiscal year, plus and additional
$3.6 million to be ratified to cover fires that occurred in
the last fiscal year after the legislature adjourned.
Co-Chair Parnell clarified this request only covers the
fires to date and does not cover any fires that may occur
between now and June 30, 2000. Ms. McConnell affirmed and
said the Administration would provide updates of any fires
that may occur before the legislature departs in May.
Ms. McConnell directed the Committee's attention to Section
1 of the bill, which addresses funding for the Gulf Coast
Storm. She said she would detail the costs of this natural
disaster later in her presentation. She did say there is a
need for approximately $400,000 to cover costs associated
with other major winter storm activity outside of the
declared disaster area.
Co-Chair Parnell directed the discussion back to fire
suppression and read from AS 26.23.050, the provision that
allows the governor to reauthorize funds appropriated for
other purposes to cover fire suppression costs. He spoke of
a letter sent by the Senate Finance Committee co-chairs to
the governor suggesting this funding alternative be used to
keep the supplemental request lower. Co-Chair Parnell asked
if this was attempted. Ms. McConnell replied that the
Administration did look at doing this, but noted that at
the time the fire disaster was declared, the fire activity
was so intense it was expected to cost about $9.2 million.
The Office of Management and Budget determined that simply
having an executive budget adjustment of this amount was
not the best decision. She warned that if a large sum of
money were taken from programs such as Medicaid, a
supplemental request would still be necessary.
Co-Chair Parnell asked if this were an "all or nothing"
situation or if reappropriation of a percentage of the
needed amount was considered. Ms. McConnell responded that
the departments were already dealing with the unallocated
budget reductions imposed by the legislature in the FY00
Operating Budget along with allocated reductions. Because
these are major changes, she stressed they need to be dealt
with at the legislative level.
Ms. McConnell next addressed the formula funding programs
noting a total of $21 million is needed in 13 different
program areas that were funded at less than the required
level. She noted leasing commitments with the private
sector that were short-funded in the FY00 budget.
Ms. McConnell pointed out that the issue of the Medicaid
"option list" was discussed with the legislature last year
during budget deliberations and it was determined that it
should not be imposed in order to stay within the funding
amount. She also said that intent language was inserted
into the FY00 Operating Budget stating that a supplemental
budget request could be used to fully fund the longevity
bonus program.
Co-Chair Parnell interjected stressing that no such
discussion relating to Medicaid options took place in the
Senate Finance Committee. He qualified that Representative
Therriault did make related comments in the House Finance
Committee asking the department to not cut options.
Ms. McConnell agreed that Representative Therriault and
Representative Mulder made the comments. However, she
countered that in discussions held during Senate Finance
Budget Subcommittee meetings and Senate Finance Committee
meetings, she had argued that if the legislature was not
going to fully fund certain services such as those provided
by Medicaid, there needed to be explicit intent language.
Co-Chair Parnell thought that the statutes are clear in
stating that if there is inadequate funding, the Medicaid
options are cut off in a rational order.
Ms. McConnell told the Committee she has asked the
Department of Health and Social Services to prepare an
estimate of what will happen if no additional funding is
allocated to meet the current options list. She learned
that the "implications will be staggering." Items such as
emergency dental care and other services that have been
determined to be important would be eliminated, according
to Ms. McConnell.
Ms. McConnell talked about some unexpected items, the
largest being the need for an additional $2.1 million for
pupil transportation. She detailed the expected 3.5 percent
contractual cost increase that turned out to be much higher
in Anchorage, Kenai and Fairbanks. She pointed out that the
state has no control over the cost of the negotiated
contracts between school districts and carriers because it
is a reimbursement program rather than a fixed amount
calculated per student or the distance of travel. She
referred to a detailed breakdown by school district in the
backup material provided by the Office of Management and
Budget to the Committee.
Co-Chair Parnell asked what attributed to the increased
contracts. Ms. McConnell replied it is essentially a lack
of competition.
Senator Adams asked how the state could contain the cost of
this program when there are two components of the program:
one operating on a contract basis for the service and the
other with school districts operating in-house.
Ms. McConnell told of earlier suggestions for a
reimbursement calculated on a per-pupil basis rather than
the current formula system. She predicted this might spur
competition between carriers.
Senator Wilken shared with the Committee that the
Department of Education and Early Development Senate
Finance Budget Subcommittee is addressing the matter and
will have a report for the full Committee.
Senator Green was concerned that there is no incentive to
keep costs down because of the full reimbursement system.
She knew of no other programs that received reimbursement
just because costs increased. Co-Chair Parnell noted that
contracts with private prisons operated in this manner as
well. Senator Green said both should be addressed.
Senator Wilken stated that efforts are being made by the
department and the subcommittee to institute "checks and
balances" that would bring more competition into the
process.
Co-Chair Parnell reminded members that although the
deadline to introduce personal legislation has passed, the
Committee could sponsor a bill addressing some of these
issues so long at the interested member is willing to carry
the bill and do the legwork.
Ms. McConnell continued speaking to increased needs for the
formula funding. She hoped the Committee would allow the
Department of Education and Early Development an
opportunity to explain the complicated K-12 formula
program. She did point out that there were several ways the
department was able to compensate for some of the under-
funding. She gave an example of an $11.8 million reduction
from the authorized level that was the result of lower
enrollment and an increase in federal impact aide.
Co-Chair Parnell asked why the department is projecting a
$19 million decrease in FY01 but only giving back $11.8
million for the current year.
Ms. McConnell answered that a $2.7 million decrease was
taken internally for some programs such as the
correspondence school. In addition, she said, Co-Chair
Torgerson identified school enrollment was probably less
than what school districts reported and subsequently $3.9
million was reduced in the authorized budget. Co-Chair
Torgerson was correct in that prediction, according to Ms.
McConnell.
Co-Chair Parnell asked if the $11.8 amount is an estimate
and could change. Ms. McConnell confirmed and noted that
the amount could change when the department receives the
school district's student count in November.
Co-Chair Torgerson asked if the $19.9 million funding
decrease is based on the adopted budget or on the projected
budget. Ms. McConnell explained that the decrease is the
amount calculated using information supplied by the school
districts and is a reduction to the FY00 authorized level.
Ms. McConnell next pointed out the lower caseloads for the
Adult Public Assistance Program (ATAP) and said that the
welfare program continues to produce good results, which
accounts for a savings of $1.5 million that will be placed
into the Childcare Assistance program. She stressed that in
order to keep the welfare caseloads down, the state must
provide childcare assistance so participants can continue
working.
Ms. McConnell noted federal funds were used to offset state
expenses in frontline social workers and in subsidized
adoptions. The subsidized adoption program is another
formula program that was not funded at a sufficient level,
according to Ms. McConnell.
Co-Chair Parnell asked if the $1.5 million savings from
public assistance was reflected on page five of the
supplemental bill. Ms. McConnell noted the transfer shows
up in two places in the bill: Section 9 (a) Education and
Early Development, and Section 10 (k) Health and Social
Services.
Ms. McConnell noted the other area where other funds were
used to offset general fund requirements is in the
Longevity Bonus Program. She explained the Administration
intends to use the funds leftover from the Y2K Readiness
appropriation to fund the shortfall. She reminded the
Committee that the program was under-funded by $2.4 million
and the appropriation contained intent language directing
the Administration to come before the legislature with a
supplemental request for the remaining funds. Senator
Phillips asked what is the average age of participants. She
stated that the drop in necessary funding from year to year
is not substantial despite the phase-out of the program.
Ms. McConnell said she would have the department provide
the average age of participants and projections for the
out-years.
Ms. McConnell then addressed the Power Cost Equalization
(PCE) program. She said the Administration recommends using
the $8 million dividend from Alaska Industrial Development
and Export Authority (AIDEA) to fund the remainder of the
program. She said the one-time dividend is the result of a
change in accounting rules. She detailed the role of
capital gains and realized and unrealized earnings.
Co-Chair Parnell wanted to know if AIDEA money is currently
used to fund PCE. Ms. McConnell responded that there was a
"carry forward" of $2.2 million in the PCE fund plus 60
percent or $5.5 million of the Four Dam Pool revenues and
approximately $200,000 in interest revenues. The remaining
amount, she said was to come from the National Petroleum
Reserve Alaska (NPRA) grant, which does not have a
resolution yet. She stressed there still is the issue of
next year's PCE to fund. She noted that AIDEA is working
with the Administration and the legislature to find a long-
term solution to PCE.
Co-Chair Parnell restated his question as to whether or not
AIDEA funds are currently used to fund PCE. Ms. McConnell
answered it is not.
Ms. McConnell finished her presentation with an overview of
the Central Gulf Coast Storm. She handed out a letter from
Phil Oates, Commissioner of the Department of Military and
Veterans Affairs addressed to the speaker of the House of
Representatives and the President of the Senate. The letter
contained a spreadsheet detailing the costs associated with
the disaster. She stated the total cost from communities,
businesses, private individuals, utility companies and
state agencies has been reported to date as $16.3 million.
She described the process of the request to the president
of the United States for a declaration of Federal Emergency
Management Agency (FEMA) disaster.
Senator Adams asked what disaster statute is being used in
this situation. Ms. McConnell replied that the current
statute is being used because SB 101, which changes the
definition of disaster, was not transmitted to the governor
yet because of a technicality. Co-Chair Parnell pointed out
that this is a natural disaster rather than an economic
disaster, which is the type of disaster SB 101 addresses.
Ms. McConnell told the Committee the Administration is
hoping to have a decision from the president of the United
States this week as to whether or not the storm will be
declared a federal disaster.
Senator Wilken referred to the requested transfer from the
Y2K appropriation to the Longevity Bonus Program and wanted
to know if the Y2K money doesn't lapse into the
Constitutional Budget Reserve if not spent by March first.
Ms. McConnell corrected the date is March 31, 2000.
Senator Phillips had a question on the Central Gulf Coast
Storm regarding the Matanuska Electric Association (MEA).
He noted that from 20,000 to 30,000 residents of the
Municipality of Anchorage were affected by the power
outages from MEA. Senator Green pointed out that it is
listed under the Matanuska-Susitna Borough. Ms. McConnell
also thought it is was covered in the Matanuska-Susitina
Borough claim but said that the department would confirm.
Senator Phillips wanted to know the accounting process of
this expenditure would be.
Senator Green had two questions relating to the Central
Gulf Coast Storm. She wanted to know if the agencies
deducted the expenses for the normal activities that would
have been performed if there were no disaster. She also
asked if insurance would cover some of the claims that were
filed.
Ms. McConnell replied to the first question by saying that
some agencies are reporting the entire cost of their
expenses if they otherwise have no related activity in the
area of the disaster. However, only the additional disaster
costs are covered. She gave an example of the Department of
Transportation and Public Facilities' normal activity to
only plow two inches of snow from the highway but will
claim expenses for the extra effort required to clear an
avalanche. She assured the Committee that a verification
process would determine the actual costs of the disaster.
Ms. McConnell answered the second question by saying that
some of the reported damages claimed under the FEMA
declaration will eventually be covered by insurance.
However, because people could be unsure if insurance would
cover all of the damage, claims were filed for those
damages.
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