Legislature(2007 - 2008)SENATE FINANCE 532

03/10/2008 09:00 AM Senate FINANCE


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09:19:25 AM Start
09:23:32 AM HB310 || HB312
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 310 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+ HB 312 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
*+ SB 221 BUDGET: CAPITAL, SUPP. & OTHER APPROPS TELECONFERENCED
<Above Bill Hearing Postponed>
+ Department Presentations Rescheduled to TELECONFERENCED
03/11/08 9:00 am
Transportation & Public Facilities
Environmental Conservation
Natural Resources
                 SENATE FINANCE COMMITTEE                                                                                       
                      March 10, 2008                                                                                            
                         9:19 A.M.                                                                                              
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Hoffman called the Senate Finance Committee                                                                            
meeting to order at 9:19:25 AM.                                                                                               
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Charlie Huggins, Vice-Chair                                                                                             
Senator Kim Elton                                                                                                               
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
Senator Fred Dyson                                                                                                              
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Karen Rehfeld, Director, Office of Management and Budget;                                                                       
Kevin   Brooks,    Deputy   Commissioner,    Department   of                                                                    
Administration                                                                                                                  
                                                                                                                                
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
CSHB 310(FIN) am                                                                                                                
     An  Act making  appropriations  for  the operating  and                                                                    
     loan program expenses of  state government, for certain                                                                    
     programs,    and    to   capitalize    funds;    making                                                                    
     appropriations under art.  IX, sec. 17(c), Constitution                                                                    
     of the State of Alaska;  and providing for an effective                                                                    
     date.                                                                                                                      
                                                                                                                                
     CSHB 310(FIN)  am was HEARD  and HELD in  Committee for                                                                    
     further consideration.                                                                                                     
                                                                                                                                
CSHB 312(FIN)                                                                                                                   
     An  Act making  appropriations  for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date.                                                                                                         
                                                                                                                                
     CSHB  312(FIN)  was HEARD  and  HELD  in Committee  for                                                                    
     further consideration.                                                                                                     
                                                                                                                                
                                                                                                                                
CS FOR HOUSE BILL NO. 310(FIN) am                                                                                             
                                                                                                                                
     An  Act making  appropriations  for  the operating  and                                                                    
     loan program expenses of  state government, for certain                                                                    
     programs,    and    to   capitalize    funds;    making                                                                    
     appropriations under art.  IX, sec. 17(c), Constitution                                                                    
     of the State of Alaska;  and providing for an effective                                                                    
     date.                                                                                                                      
                                                                                                                                
CS FOR HOUSE BILL NO. 312(FIN)                                                                                                
                                                                                                                                
     An  Act making  appropriations  for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date.                                                                                                         
                                                                                                                                
KAREN REHFELD,  DIRECTOR, OFFICE  OF MANAGEMENT  AND BUDGET,                                                                    
discussed  the status  of  the  operating budget  amendments                                                                    
totaling  approximately $41  million dollars.   She  pointed                                                                    
out the  two packets of  amendments submitted by  the Office                                                                    
                                         th                                                                                     
of  the  Governor,  one  on  February  13   and  the  others                                                                    
                          th,                                                                                                   
forwarded  on  February 29which     indicates  General  Fund                                                                    
reductions of approximately $7.6 million dollars.                                                                               
                                                                                                                                
She  advised  that the  Senate  Finance  Committee would  be                                                                    
considering  the  House  version of  the  operating  budget.                                                                    
There are  issues in the  House version because  some budget                                                                    
amendments  were submitted  just as  the subcommittees  work                                                                    
had  been completed.   She  understood that  amendments from                                                                    
           th                                                                                                                   
February 29 had not been incorporated.                                                                                          
                                                                                                                                
Ms. Rehfeld  identified a  new appropriation  level included                                                                    
for oil and gas development  items related to the Alaska Gas                                                                    
Inducement  Act (AGIA).   There  are  some corrections  that                                                                    
need to  be made  to the structure  of the  appropriation to                                                                    
include  the   correct  items.     She   addressed  interest                                                                    
expressed  by  legislative  members  to  move  some  capital                                                                    
requests to the operating budget.                                                                                               
                                                                                                                                
9:23:32 AM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld continued,  there has  been approximately  nine                                                                    
projects identified  by the  Senate Finance  Committee (SFC)                                                                    
to be moved  to the operating budget.  In  the House budget,                                                                    
six  of   the  items  were   moved  and  three   remain  for                                                                    
consideration.                                                                                                                  
                                                                                                                                
       The Department of Health and Social Services project                                                                  
        for Child and Family Services reviews;                                                                                  
       The Department of Natural Resources, Boating Safety                                                                   
        Program; and                                                                                                            
       The Department of Natural Resources, Oil & Gas                                                                        
        Royalty evaluation work.                                                                                                
                                                                                                                                
She  explained that  the requests  could be  moved into  the                                                                    
operating budget.   She anticipated that  the boating safety                                                                    
program  would  present challenges  due  to  the three  year                                                                    
grant funding cycle.   She added that if  the Senate intends                                                                    
to look toward that structure,  some clean-up work will need                                                                    
to be accomplished.                                                                                                             
                                                                                                                                
Other  areas  in the  House  operating  budget were  reduced                                                                    
based on  fiscal conservative  points of  view.   She stated                                                                    
there are  a few that  the Administration would like  to see                                                                    
the Senate restore.                                                                                                             
                                                                                                                                
9:25:32 AM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld highlighted  inclusion of  the bargaining  unit                                                                    
agreement  costs, which  cover the  General Government  Unit                                                                    
{GGU) and  the supervisory unit.   Also attached  before the                                                                    
Committee  is  a  non-exempt  pay   bill.    The  bargaining                                                                    
agreements are included in the operating budget.                                                                                
                                                                                                                                
9:26:35 AM                                                                                                                    
                                                                                                                                
Senator Dyson  inquired about the  issues related  to boater                                                                    
safety.  Ms. Rehfeld  explained that originally, the project                                                                    
was   requested  as   a   capital   budget  item,   however,                                                                    
legislative interest has been to  move it into the operating                                                                    
budget.  The only concern  with the boater safety program is                                                                    
that it  is under  a grant program,  which exceeds  the one-                                                                    
year timeframe with a longer lapse date.                                                                                        
                                                                                                                                
Senator  Dyson  inquired if  the  grant  funds were  federal                                                                    
pass-through dollars.   Ms. Rehfeld confirmed.   In response                                                                    
to Senator Dyson, Ms. Rehfeld  clarified that the Department                                                                    
prefers to  see the request  stay in the capital  budget but                                                                    
if the  Legislature chooses to  move it,  the Administration                                                                    
will work with that.                                                                                                            
                                                                                                                                
Senator Dyson asked the position of the House.                                                                                  
                                                                                                                                
9:28:33 AM                                                                                                                    
                                                                                                                                
Ms. Rehfeld  explained that  they had  not intended  to move                                                                    
the program  and that  they moved six  of the  nine proposed                                                                    
projects.                                                                                                                       
                                                                                                                                
Ms.  Rehfeld highlighted  items  not included  in the  House                                                                    
submitted  budget, which  the Administration  would like  to                                                                    
see addressed:                                                                                                                  
                                                                                                                                
       The Department of Administration reduction for                                                                        
        maintenance at the Atwood parking garage.   That was                                                                    
        an area  of concern  to the  Administration and  the                                                                    
        Department requested it be added back in.  She noted                                                                    
        that $962 thousand dollars had been requested and it                                                                    
        was reduced by $400 thousand dollars.                                                                                   
                                                                                                                                
9:30:16 AM                                                                                                                    
                                                                                                                                
In  response  to  queries  by  Senator  Elton,  Ms.  Rehfeld                                                                    
explained that she was addressing  changes made in the House                                                                    
proposed budget and not specific amendments to the handout.                                                                     
                                                                                                                                
                                                                                                                                
AT EASED:      9:31:02 AM                                                                                                     
RESUMED:       9:31:19 AM                                                                                                     
                                                                                                                                
                                                                                                                                
Ms. Rehfeld stated that the  amendments on the first page of                                                                    
the handout  had been included  in the House version  of the                                                                    
budget.  She highlighted the most important references:                                                                         
                                                                                                                                
       The Office of Public Advocacy (OPA) and the Public                                                                    
        Defender Agency.  The Administration did include                                                                        
        in those budgets the amount attached in the                                                                             
        supplemental this year.                                                                                                 
                                                                                                                                
She added  that work is  needed on the proposed  2009 budget                                                                    
area,  which has  been a  difficult  area to  project.   The                                                                    
actual costs of the program  in conjunction with the work to                                                                    
the  criminal  justice  working  group  has  been  provided,                                                                    
attempting to  determine all important  components necessary                                                                    
for that  system.  Until  the amount can be  determined, the                                                                    
Administration is requesting the  identical number sought in                                                                    
the supplemental bill.                                                                                                          
                                                                                                                                
Ms. Rehfeld addressed specific corrections:                                                                                     
                                                                                                                                
       To the Department of Education and Early Development                                                                  
        holdover from last year, when direct-deposit for the                                                                    
        retirement system cost errors were made.                                                                                
                                                                                                                                
9:33:07 AM                                                                                                                    
                                                                                                                                
Ms. Rehfeld indicated Line 14:                                                                                                  
                                                                                                                                
       An addition to the Head Start program amount in                                                                       
        order to address the wait list.  The current budget                                                                     
        contains approximately $6 million dollars in grants,                                                                    
        whereas, the proposed provides a 10% increase.                                                                          
                                                                                                                                
9:34:21 AM                                                                                                                    
                                                                                                                                
Senator  Elton  asked  if  the   House  created  a  matching                                                                    
component for  the Head Start  grant and if they  had, would                                                                    
the  amendment address  the match.    Ms. Rehfeld  responded                                                                    
that the Governor's  budget amounted to an  increase of $600                                                                    
thousand  dollars without  a matching  component.   The Head                                                                    
Start funding  was to specifically address  the waitlist for                                                                    
that program.   She pointed out that the  House had included                                                                    
intent language  to require the  match.  She  explained that                                                                    
the Department would  issue the first round of  grants at $6                                                                    
million dollars  and then look  at the $600  thousand dollar                                                                    
allocation  based  on  which programs  could  demonstrate  a                                                                    
match.                                                                                                                          
                                                                                                                                
9:35:26 AM                                                                                                                    
                                                                                                                                
Senator  Elton questioned  the  historic  grants related  to                                                                    
Head Start in  relationship to the matching  component.  Ms.                                                                    
Rehfeld  reiterated   that  the   proposed  Administration                                                                      
budget would be an increase  of $600 thousand dollars, which                                                                    
would be used for that program's wait lists.      The  House                                                                    
had added intent language to require the match.                                                                                 
                                                                                                                                
She continued the overview of Page 2.                                                                                           
                                                                                                                                
       Monetary corrections to the retirement system.                                                                        
       Series of amendments to  the Department of  Fish and                                                                  
        Game related  to  the  unexpected  lose  of  federal                                                                    
        dollars.   The  request  was  adopted in  the  House                                                                    
        version.                                                                                                                
       Department of Health and Social  Services, where the                                                                  
        Administration attempted to allocate a $17.5 million                                                                    
        dollar placeholder in the budget to be used for rate                                                                    
        adjustments.                                                                                                            
                                                                                                                                
9:37:54 AM                                                                                                                    
                                                                                                                                
Ms. Rehfeld continued:                                                                                                          
                                                                                                                                
       Department  of  Health  and  Social  Services     an                                                                  
        allocation for  moving  the  Senior Benefit  program                                                                    
        into its  own  component.   Most  of the  components                                                                    
        address  the  recommendations   for  the   rates  as                                                                    
        accepted by the House.                                                                                                  
       Department of  Labor and  Workforce Development    a                                                                  
        one time funding for the Southwest Alaska Vocational                                                                    
        Education  Center  (SAVEC)  operating  grant,  which                                                                    
        experienced an unexpected loss of federal dollars.                                                                      
       Department of Law   dollars requested to cover lease                                                                  
        space costs in Anchorage.                                                                                               
       Department of Law   requested funding  in the amount                                                                  
        of  $4.7  million   dollars  related   to  corrosion                                                                    
       litigation, as adopted in the House version.                                                                             
                                                                                                                                
9:39:56 AM                                                                                                                    
                                                                                                                                
Ms. Rehfeld emphasized that the following items were the                                                                        
most significant areas:                                                                                                         
                                                                                                                                
       Department of Natural  Resources -  fire suppression                                                                  
        aviation costs as adopted in the House version.                                                                         
       Department of Public Safety -  vehicle cost included                                                                  
        at ½ the requested amount in the House version.                                                                         
                                                                                                                                
Senator  Olson referenced  a letter  from the  Department of                                                                    
Public  Safety  indicating  that  the  Department  would  be                                                                    
acquiring three  new aircrafts,  one of  which being  a King                                                                    
Air  350.   He  questioned if  the  Administration had  been                                                                    
aware of  that request.   Ms. Rehfeld  was not aware  of the                                                                    
King Air  purchase; however, understood that  the Department                                                                    
of Public Safety needs to acquire additional aircraft.                                                                          
                                                                                                                                
Senator Olson clarified that the  Request for Proposal (RFP)                                                                    
                                 th                                                                                             
had been distributed  on March 11  for  those two aircrafts.                                                                    
Ms.  Rehfeld advised  that there  could  have been  existing                                                                    
funds for  the aircraft purchase.   She offered  to research                                                                    
that request.                                                                                                                   
                                                                                                                                
Co-Chair  Hoffman  recalled  that  two  aircrafts  had  been                                                                    
damaged.   Senator  Olson acknowledged  that there  were two                                                                    
super  cub  accidents that  damaged  the  two aircrafts  and                                                                    
taking them out of commission.   Those aircraft were rebuilt                                                                    
when a RFP went out for the additional two.                                                                                     
                                                                                                                                
Co-Chair Hoffman  asked Senator Olson  if the intent  was to                                                                    
fix the damaged  aircraft and keep them or if  they would be                                                                    
replaced and sold  for the acquisition of  the new aircraft.                                                                    
Senator  Olson understood  that the  two new  ones would  be                                                                    
retained along  with repairing the  other two.   Ms. Rehfeld                                                                    
offered to investigate the concern.                                                                                             
                                                                                                                                
9:43:32 AM                                                                                                                    
                                                                                                                                
Senator Thomas referenced:                                                                                                      
                                                                                                                                
       Department of Law - an anticipated law-suit                                                                           
        reference item  82  BPXA  Corrosion  Litigation  for                                                                    
        pursuing the claims for penalties  and lost revenues                                                                    
        in  the  2006   Prudhoe  Bay  pipeline   spills  and                                                                    
        production  shutdowns.     The  Department   of  Law                                                                    
        anticipates  making  a  recommendation  to  commence                                                                    
        litigation to recover the State's revenue losses, as                                                                    
        well  as  civil  penalties  and  damages  under  the                                                                    
        State's  environmental  statutes.    The  Department                                                                    
        anticipates the litigation  will last three  to four                                                                    
        years and  that  additional  appropriations will  be                                                                    
        needed.                                                                                                                 
                                                                                                                                
Ms. Rehfeld recommended that the  Committee could be briefed                                                                    
during  an Executive  Session to  discuss those  elements of                                                                    
concern.                                                                                                                        
                                                                                                                                
Senator Thomas inquired if Ms.  Rehfeld knew the anticipated                                                                    
amount  to  the State  from  the  litigation.   Ms.  Rehfeld                                                                    
replied  that she  did  not have  that  information but  the                                                                    
Department  of  Law  would  be  able to  provide  it.    She                                                                    
indicated that the Department  anticipates the litigation to                                                                    
extend up  to five  years and  that the  request would  be a                                                                    
significant amount of recoverable funds.                                                                                        
                                                                                                                                
Ms. Rehfeld continued:                                                                                                          
                                                                                                                                
       Department   of   Revenue        the   Natural   Gas                                                                  
        Commercialization component  in the  amount of  $1.2                                                                    
        million dollars.    The  amount had  been  indicated                                                                    
        under Alaska  Gas Inducement  Act (AGIA),  which the                                                                    
        Department failed to include.  It would provide FY09                                                                    
        operating funds as indicated on the fiscal note.                                                                        
       Department of Transportation and Public Facilities                                                                    
        some amendment  proposals had  not been  included in                                                                    
        the House version of the budget.   Priority requests                                                                    
        including  a  new  maintenance   management  system;                                                                    
        maintenance  and   operations  increment   for  road                                                                    
        weather   information    system;    specific    road                                                                    
        maintenance projects and risk management increments.                                                                    
        She stressed that for the most  part, the Department                                                                    
        of Transportation  and  Public  Facilities  requests                                                                    
        were not  included  in  the  budget from  the  House                                                                    
        version of the operating budget.                                                                                        
                                                                                                                                
9:47:20 AM                                                                                                                    
                                                                                                                                
Ms. Rehfeld continued:                                                                                                          
                                                                                                                                
       University of Alaska - the Alaska Community                                                                           
        Colleges'  Federation  of  Teachers   (ACCFT)  union                                                                    
        agreement was ratified on  February 4th, 2008.   The                                                                    
        agreement  included  a  4.9%   salary  increase,  no                                                                    
        increase for employer health  care contributions and                                                                    
        a one-time  $800 workforce  development stipend  per                                                                    
        retained ACCFT faculty member  for FY09.   The total                                                                    
        FY09 increment for the ratified agreement with ACCFT                                                                    
        is $1,195.8  ($978.7 GF,  $217.1 UA  Receipts).   Of                                                                    
        that amount,  the University  has already  requested                                                                    
        $823.8 ($606.7 GF, $217.1  UA Receipts) in  the FY09                                                                    
        operating budget. The University reached a tentative                                                                    
        three-year  agreement  with  the   United  Academics                                                                    
        (UNAC) union on  December 17,  2007.   The tentative                                                                    
        agreement includes  a 6.3%  salary  increase and  no                                                                    
        increase for  employer  health  care  contributions.                                                                    
        The  agreement  is  tentative,  but  the  University                                                                    
        anticipates the union  will ratify the  agreement as                                                                    
        early as the week of February 18th.                                                                                     
       An additional request to increase the amount                                                                          
        distributed under  fuel allocations"  in the budget.                                                                    
        That request was based on the amount included in the                                                                    
        supplemental bill with  some adjustments made.   She                                                                    
        pointed out that  the House Finance  Committee (HFC)                                                                    
        was reworking the   trigger mechanism  base amount",                                                                    
        resulting in some changes.                                                                                              
                                                                                                                                
Co-Chair  Hoffman  asked  why the  increased  costs  to  the                                                                    
school districts  had not been  included in the  request for                                                                    
the fuel cost  increase.  He acknowledged  that districts do                                                                    
receive  funds  under  the  area  cost  differential,  which                                                                    
covers only 50% of the recommended increase.                                                                                    
                                                                                                                                
Ms.  Rehfeld  clarified  that  the  Administration  had  not                                                                    
received  a request  from  school  districts regarding  fuel                                                                    
cost  recommendations  separate  from the  funding  that  is                                                                    
provided  through  the  foundation  formula.    She  further                                                                    
commented  on  discussions   regarding  whether  fuel  costs                                                                    
should be a part of the foundation formula.                                                                                     
                                                                                                                                
Ms.  Rehfeld  identified  specific amendments  submitted  on                                                                    
            th                                                                                                                  
February  29   that are  not  specified on  the green  sheet                                                                    
(Gov's FY09 Operating Budget Amendments):                                                                                       
                                                                                                                                
       Supervisory bargaining unit agreement, which is a                                                                     
        total General Fund amount of  $7.23 million dollars;                                                                    
        all  funds  total  $16.9  million  dollars  for  the                                                                    
        supervisory bargaining unit agreement.                                                                                  
       Additionally, $200 thousand dollars for the Alaska                                                                    
        Energy Authority  (AEA) for  the Executive  Director                                                                    
        position, which was recently appointed.                                                                                 
       Proposal to spread the Medicaid unallocated                                                                           
        reduction in  the  House  budget  to  some  specific                                                                    
        components.                                                                                                             
       An amendment to address the completion costs for the                                                                  
        Bethel runway project.                                                                                                  
                                                                                                                                
9:51:39 AM                                                                                                                    
                                                                                                                                
Senator   Dyson  requested   further   information  on   the                                                                    
component  in the  Department of  Public Safety,  the Alaska                                                                    
State  Trooper  salary and  benefit  package.   Ms.  Rehfeld                                                                    
responded  that  the   budget  submitted  included  specific                                                                    
increases  to  cover  the five  new  trooper  positions  and                                                                    
personal services funding associated with that.                                                                                 
                                                                                                                                
Senator Dyson asked  if there had been an  increase added to                                                                    
the salary  and benefit package  for troopers.   Ms. Rehfeld                                                                    
explained  that  the  State  was  currently  working  on  an                                                                    
agreement  with the  Department of  Public Safety  employees                                                                    
and that it had not yet been negotiated.                                                                                        
                                                                                                                                
Senator  Dyson requested  assurance that  there would  be an                                                                    
increase would be covered in the budget.                                                                                        
                                                                                                                                
9:54:39 AM                                                                                                                    
                                                                                                                                
KEVIN   BROOKS,    DEPUTY   COMMISSIONER,    DEPARTMENT   OF                                                                    
ADMINISTRATION,  clarified  that  the Administration  is  in                                                                    
active  negotiations with  the Department  of Public  Safety                                                                    
employees  and that  the intention  is to  reach a  monetary                                                                    
term agreement as quickly as possible.                                                                                          
                                                                                                                                
Senator Dyson  questioned how many  new troopers  would join                                                                    
the force next  year if the proposed plan is  accepted.  Ms.                                                                    
Rehfeld  responded  that there  would  be  five new  trooper                                                                    
positions built into  the FY09 budget.   She understood that                                                                    
there were  approximately eleven  vacant positions  and that                                                                    
five  positions would  be hired  for the  FY09 budget.   She                                                                    
offered to provide the exact numbers to the Committee.                                                                          
                                                                                                                                
Senator Olson added his request for those specific numbers.                                                                     
                                                                                                                                
CSHB 310(FIN) am & CSHB  312(FIN) were HELD in Committee for                                                                    
further consideration.                                                                                                          
                                                                                                                                
##                                                                                                                              
ADJOURNMENT                                                                                                                   
                                                                                                                                
                                                                                                                                
The meeting was adjourned at 10:12 A.M.                                                                                         
                                                                                                                                
                                                                                                                                

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