Legislature(2015 - 2016)SENATE FINANCE 532
02/04/2015 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB27 | |
| SB28 | |
| SB26 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 26 | TELECONFERENCED | |
| *+ | SB 27 | TELECONFERENCED | |
| *+ | SB 28 | TELECONFERENCED | |
SENATE BILL NO. 27
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs, capitalizing funds, making
reappropriations, and 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."
9:09:31 AM
PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced SB 27.
Co-Chair Kelly noted that the full committee was present.
Ms. Pitney explained that the bill before the committee was
a work-in-progress budget of the previous administration
that was being used as a placeholder to be submitted on the
statutory deadline. She said that amendments were
forthcoming and would be received by the committee on
February 5, 2015, and would show a reduction in the
Operating Budget of over $100 million. She referenced the
previous overview and relayed that agencies, non-formula,
would have a 6.5 percent decrease in their budgets, roughly
a reduction of $140 million from 2014. She listed several
specific reductions to the Department of Corrections, the
Department of Administration, the Department of Health and
Social Services, and Information Technology. She
anticipated that once the committee had the opportunity to
peruse the detailed budget books, a deeper discussion could
occur.
9:12:15 AM
Vice-Chair Micciche understood that the Office of
Management and Budget (OMB) had not had time to create a
revised budget to present to the committee.
Ms. Pitney replied in the affirmative.
Vice-Chair Micciche understood that the administration
would see the revised budget before the committee received
a copy.
Ms. Pitney clarified that the administration had viewed the
revised budget and was in the process of compiling the
details for each department in order to transmit one
package to the committee.
9:13:12 AM
Senator Hoffman asked about the aforementioned 6.5 percent
reduction from the previous administration's budget. He
said that the governor had mentioned in his State of the
Budget address a reduction of 5-9 percent. He queried the
percent reduction in the revised budget. He wondered
whether even 9 percent would be an adequate reduction in
state spending.
Ms. Pitney responded that there was a 5 percent reduction
in non-formula agencies between the work in progress budget
before the committee and the governor's amended budget.
She relayed that the 6.5 percent reduction was the
reduction from agency non-formula operating budgets from
the 2015 management plan to the amended budget. The 9
percent reduction was a combination of the Operating Budget
and the Capital Budget management plan 2015, compared to
the governor's amended plan.
Senator Hoffman asked what the original anticipated draw on
the Constitutional Budget Reserve (CBR) for the current
fiscal year and subsequent years considering the low price
of oil.
Ms. Pitney replied that the estimated draw from the CBR was
$3.5 billion for 2015. She added that if the price of oil
increased the draw was expected at $3.2 billion.
9:17:18 AM
Ms. Pitney relayed that if oil remained at $50 per barrel,
the savings would be depleted by the middle of FY18; if the
e price of oil went with the forecast from DOR, the savings
would last until 2022.
Senator Hoffman understood that in FY15 and FY16 the
potential burn could be as high as high as $7 billion.
Ms. Pitney replied in the affirmative.
9:18:01 AM
Vice-Chair Micciche clarified that the work in progress
budget had a 1.5 percent reduction from the previous
administrations FY15 budget and the budget that would be
rolled out on February 2, 2015, would reflect an additional
5 percent reduction, which would result in a total of 6.5
percent reduction. He furthered that when the Capital and
Operating Budget reductions were added together the total
was a 9 percent reduction under FY15.
9:18:46 AM
Ms. Pitney made the point that there were three primary
reductions in the Operating Budget that were due to
Medicaid expansion. She stated that one was in the Chronic
and Acute Medical Assistance Program (CAMA), the second was
from a small reduction in some Behavioral Health Grants,
and the third piece would be the amount of the Department
of Corrections healthcare that would be covered by
Medicaid. She shared that the savings from Medicaid
expansion would total approximately $10 million. She added
that the federal funding for Medicaid was in the Operating
Budget totaling an estimated $450 million.
9:20:13 AM
Vice-Chair Micciche queried the two models that run
internally by OMB and which percentage numbers had been
used for all departments.
Ms. Pitney replied that OMB had looked at five percent and
eight percent reductions.
Vice-Chair Micciche understood that the exercise had been
internal but that the committee could visit with
commissioners in order to discuss deeper cuts to budgets.
He asked if OMB had identified specific areas where deeper
cuts could be made.
9:21:41 AM
Co-Chair Kelly interjected that Ms. Pitney did not have to
answer the question as it could put her at odds with the
governor.
9:21:54 AM
Vice-Chair Micciche rephrased his question. He surmised
that additional cuts would hurt Alaska's workforce, but
believed that deeper cuts needed to be made. He believed
that commissioners would have ideas about how additional
cuts could be made that would hurt residents a little as
possible by being economically effective.
Ms. Pitney responded that OMB challenged each of the
commissioners to look at their budget and determine what
could be reduced to operate at a 25% reduction. She agreed
that the commissioners would be best at talking about the
impacts to their departments. She said that the public
discussion, based on the current reductions, would be loud.
She shared that some reductions looked large, but needed to
be put into context with what still remained in program
budgets. She warned that as the budget rolled out and
people saw the cuts that would impact them personally,
nothing would be viewed as "low hanging fruit." She relayed
that it was the body's prerogative to determine what the
cuts would be.
9:25:25 AM
Vice-Chair Micciche stressed that his goal was to affect as
few Alaskans as possible.
9:25:45 AM
Co-Chair Kelly asked what the state's economic future
looked like if all departments took a 25 percent reduction
over the next several years. He estimated that a 25 percent
cut in all departments could equal approximately $500
million. He thought that cuts would need to be deeper than
day-to-day agency operations in order for them to be
effective. He asked whether OMB had put together a list of
larger drivers that could be cut, such as Medicaid and
Education.
Ms. Pitney reminded the committee that the administration
was working diligently on the issue of Medicaid expansion
and reform, with cost neutrality and cost reduction as the
focus. She furthered that OMB anticipated in the summer of
2015, recommendations from the education study commissioned
by the legislature on the K-12 formula. She reminded the
committee that the state faced a $3.5 billion deficit if
oil remained at $50 per barrel. She said that the 25
percent cut across all departments would equal the $500
million needed to fill the gap in the FY16 budget. She
warned that $500 million was a huge stretch; having
agencies reduce costs by 25 percent, and serve the state as
the state expected to be served, was a huge undertaking.
Co-Chair Kelly asked her to clarify how the $500 million
would fill the gap.
Ms. Pitney clarified that the DOR fall 2014 forecast
predicted oil prices at $66 per barrel in 2016, and then
back up to $100 per barrel oil. She explained that if that
revenue projection held true, and agency operating budgets
were reduced 25 percent, the state would meet that
projection. She reminded the committee that the 25 percent
cut could end up being lower than what was required to
serve the state.
9:29:33 AM
Senator Bishop hoped that committee members could offer
their experience in agency operations to the newer
commissioners in the governor's administration.
9:30:28 AM
Co-Chair MacKinnon agreed that there were many new
Commissioner-Designees that would be coming before the
legislature for confirmation. She asked for the number of
new Administrative Service Directors there were to support
the new commissioners.
Ms. Pitney replied that there were possibly two new
directors. She agreed to follow up and confirm that
information.
Co-Chair MacKinnon asked about the anticipated $450 million
from Medicaid expansion written into the Operating Budget.
Ms. Pitney replied that the state would receive $450
million in federal receipts for Medicaid expansion.
Co-Chair MacKinnon wondered whether the governor believed
that legislative approval was necessary for Medicaid
expansion.
Ms. Pitney responded that legislative approval was required
on the federal receipt authority. She said that there was
no other statutory language needed in order to expand.
Co-Chair MacKinnon predicted that the debate concerning
Medicaid expansion, whether to simply advance expansion, or
put forth a bill that would be crafted by the legislature,
would revolve around the finance committee table.
Ms. Pitney contended that the administration's process
would be very transparent, and would present legislation in
any committee, but that the need for the expansion to
travel through the budget process. She furthered that any
presentations on the impact to the state and awareness of
programs would be presented in as many forms as the
legislature wished.
9:33:17 AM
Co-Chair Kelly interjected that Medicaid expansion was a
budget move that the administration might not have the
opportunity to discuss in multiple committees because there
was no legislation to accompany the move to expand.
Co-Chair MacKinnon was unsure whether the people of Alaska
would be privy to the full conversation on expansion. She
expressed displeasure with the use executive orders to
implement policy without going through a legislative
process. She said that she would be requesting an opinion
from the legislative legal division whether there was a
statutory responsibility that the legislature approve the
expansion. She understood that expansion would benefit many
Alaskans, but hoped that the legislature would not be left
out of the process. She feared that there could be long-
term financial repercussions to the state and that future
legislatures would have to provide the expanded services
whether or not the state had the funds to do so.
9:35:18 AM
Co-Chair Kelly contended that the expansion would not serve
40,000 Alaskans. He said that the number was probably never
accurate and that the true numbers were closer to 11,000 or
6,500. He hoped that members of the press would check the
number for accuracy.
9:36:04 AM
Co-Chair MacKinnon asked whether the governor would be
receptive to a budget with deeper cuts than the governor's
proposed budget, or should the legislature fear a veto.
Ms. Pitney responded that the governor could reduce the
amount put forward by the legislature, or veto the whole
bill. She expressed the wish for collaboration between the
administration and the legislature to strike a balance. She
said that the governor's goal was to reduce the budget over
the course of time and stabilize the economy.
9:38:06 AM
Co-Chair Kelly thought that OMB would find the committee
supportive in the process.
9:39:30 AM
Senator Hoffman asked about reductions to community jails.
He felt that those reductions would be small when looking
at the big picture. He spoke of instances in rural areas
when Village Safety Patrol Officers (VPSO) and troopers had
been killed. He expressed concern for the options available
for detaining violent offenders in rural villages when the
entire community was at risk. He warned that cutting
anywhere in the Department of Corrections (DOC) budget
could affect many small communities in rural Alaska.
9:41:01 AM
Co-Chair Kelly added that budgeting to meet constitutional
obligations was unrealistic, except when it came to public
safety.
9:42:05 AM
Co-Chair MacKinnon spoke to the most recent legislative
audit of DOC. She relayed that one of the outstanding
issues of the audit was a statutory change in the ability
to allow telecommunication opportunities for the court
system as a way to save money. She hoped that the
administration was looking for savings by possibly changing
how services were delivered in the state statutorily.
SB 27 was HEARD and HELD in committee for further
consideration.
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