Legislature(2013 - 2014)SENATE FINANCE 532

02/06/2014 09:00 AM FINANCE

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Heard & Held
Karen Rehfeld
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
SENATE BILL NO. 155                                                                                                           
     "An  Act  making supplemental  appropriations,  capital                                                                    
     appropriations,  and   other  appropriations;  amending                                                                    
     appropriations;   repealing    appropriations;   making                                                                    
     appropriations to  capitalize funds; and  providing for                                                                    
     an effective date."                                                                                                        
9:30:40 AM                                                                                                                    
KAREN REHFELD,  DIRECTOR, OFFICE  OF MANAGEMENT  AND BUDGET,                                                                    
OFFICE OF  THE GOVERNOR,  introduced herself. She  wished to                                                                    
provide an  overview of the supplemental  request. She noted                                                                    
the presence of department  representatives in the committee                                                                    
room. The  supplemental requests  were not  anticipated when                                                                    
the  budgets  passed  last spring.  The  total  supplemental                                                                    
request  was  $53,370,100.  She   referred  to  the  summary                                                                    
document   (copy   on   file),   the   accompanying   8-page                                                                    
spreadsheet  (copy   on  file)  and  the   back-up  material                                                                    
detailing each request  by bill section (copy  on file). She                                                                    
noted  that less  than $1  million  of the  request was  for                                                                    
state agency  operations. Approximately  $48 million  of the                                                                    
request  was  related to  two  items;  fire suppression  and                                                                    
disaster  relief.   Approximately  $2  million   existed  in                                                                    
settlements that  were negotiated throughout the  year along                                                                    
with  $2.4  million for  emergency  repairs  not covered  by                                                                    
disaster relief funds.                                                                                                          
9:32:57 AM                                                                                                                    
She introduced  the spreadsheet: "FY2014  Supplemental Bill"                                                                    
(copy on file).                                                                                                                 
Ms.  Rehfeld discussed  Line  1 on  page 1  of  8. The  item                                                                    
addressed the  Office of Public  Advocacy in  the Department                                                                    
of  Administration. The  request  was for  $193 thousand  in                                                                    
general  funds to  address caseload  capacity and  appellant                                                                    
backlog  issues. She  stated that  the Office  of Management                                                                    
and Budget  (OMB) had  worked hard  to avoid  a supplemental                                                                    
request for  the Office  of Public  Advocacy and  the Public                                                                    
Defender  Agency.  Both   agencies  experienced  significant                                                                    
caseload  increases, which  created the  backlog. She  noted                                                                    
that OMB was considering the item for a budget amendment.                                                                       
Ms.  Rehfeld continued  with line  3 and  a similar  request                                                                    
from  the  Public  Defender Agency.  The  request  was  $650                                                                    
thousand  in   general  funds  for  caseload   capacity  and                                                                    
appellant backlog.                                                                                                              
Ms. Rehfeld moved to line  4, which addressed the Department                                                                    
of  Military and  Veterans Affairs  and the  Alaska Military                                                                    
Youth Academy.  The requested $48 thousand  of general funds                                                                    
would enable  a fund  source change addressing  the one-time                                                                    
payment approved last year by the legislature.                                                                                  
9:34:58 AM                                                                                                                    
Ms. Rehfeld  continued with line  5 of the  spreadsheet. The                                                                    
request was for the Department  of Natural Resources and the                                                                    
2014 fire  suppression activity.  The request  would provide                                                                    
general   funds   for   expenditures  incurred   under   the                                                                    
Declaration of Disaster Emergency  process for the fall 2013                                                                    
fire season.  Additional authorization for this  purpose was                                                                    
requested each  year due to  the unpredictable cost  of each                                                                    
fire  season.  She  added that  the  Department  of  Natural                                                                    
Resources   worked  closely   with  federal   partners  when                                                                    
firefighting  on Alaskan  lands. The  portions deemed  state                                                                    
responsibility  were  brought  forward in  the  supplemental                                                                    
bill. The request was for $22,769,400 in general funds.                                                                         
9:35:44 AM                                                                                                                    
Co-Chair  Meyer  asked about  the  $22  million request.  He                                                                    
wondered how  the particular fire  was started.  He recalled                                                                    
concern that  the military caused  the fire and  the federal                                                                    
government ought to be billed.                                                                                                  
Ms. Rehfeld  responded that the  supplemental request  was a                                                                    
reflection  of several  fires. She  stated that  the request                                                                    
was based on the amount  of federal funding available to pay                                                                    
for the cost  of the forest fires.  The legislature received                                                                    
letters   from   the   administration   reporting   on   the                                                                    
expenditures to date. She offered  to have the Department of                                                                    
Natural Resources testify about the item.                                                                                       
9:37:05 AM                                                                                                                    
JEANMARIE  DAVIS, DIRECTOR,  DIVISION  OF SUPPORT  SERVICES,                                                                    
DEPARTMENT OF NATURAL RESOURCES,  responded that the fire in                                                                    
question  occurred primarily  on  federal land  and did  not                                                                    
contribute  to  the  supplemental request.  She  echoed  Ms.                                                                    
Rehfeld that  the request included expenses  from the entire                                                                    
2014 fire season.                                                                                                               
Co-Chair Meyer asked if the  department was comfortable with                                                                    
the amount of money contributed by the federal government.                                                                      
Ms.  Davis clarified  that  the state  would  not incur  the                                                                    
majority of expenses for that particular fire.                                                                                  
Co-Chair Meyer  asked if the department  was seeking further                                                                    
funding from the federal government to pay for the fire.                                                                        
Ms.  Davis replied  that the  state  was in  the process  of                                                                    
exchanging  bills   with  the  federal  government,   but  a                                                                    
completion of  the exchange would  not alter the  request of                                                                    
$22 million.                                                                                                                    
Co-Chair Meyer  asked how much  additional money  was sought                                                                    
from the federal government for the fire in question.                                                                           
Ms.  Davis replied  that  the state  sought  $33 million  in                                                                    
reimbursement  from  the  federal  government  for  expenses                                                                    
related to  state resources utilized  in fighting a  fire on                                                                    
federal land.                                                                                                                   
9:39:35 AM                                                                                                                    
Ms. Rehfeld continued with line  6. The request was from the                                                                    
Department  of  Revenue  and   the  Treasury  Division.  The                                                                    
request was  for $19  thousand in  public school  trust fund                                                                    
receipts.  She noted  that investment  management fees  were                                                                    
charged as a percent of  the market value of invested assets                                                                    
under  management.  She pointed  out  that  OMB observed  an                                                                    
increase in the  invested assets. She stated that  page 2 of                                                                    
the spreadsheet  displayed two other funds  under investment                                                                    
management by the Treasury Division.  She highlighted line 7                                                                    
and  a  request for  $7  thousand  from the  retiree  health                                                                    
insurance  fund for  the market  value  of their  management                                                                    
fees.  She  continued  with  line 8  and  the  $16  thousand                                                                    
request related  to investment management of  the Power Cost                                                                    
Equalization Endowment Fund.                                                                                                    
Ms.  Rehfeld  stated that  line  7  concluded the  operating                                                                    
number section of the supplemental  bill. She shifted to the                                                                    
capital component of the request.                                                                                               
9:40:51 AM                                                                                                                    
Ms.  Rehfeld  pointed  out line  11  and  the  appropriation                                                                    
request  of   $500  thousand   to  the   Inter-Island  Ferry                                                                    
Authority. The funding  was designed to assist  the ferry in                                                                    
providing daily service between  Ketchikan and the Prince of                                                                    
Wales Island.  The funds were  considered vital  to continue                                                                    
the transportation link.                                                                                                        
Senator Dunleavy understood that  the request was considered                                                                    
a capital request,  but he noted the  history of legislative                                                                    
contributions  to  the   Inter-Island  Ferry  Authority.  He                                                                    
recalled  the prior  years' spending.  He  wondered about  a                                                                    
better plan to address the issue.                                                                                               
Ms.  Rehfeld replied  that OMB  had communicated  diligently                                                                    
with the  Inter-Island Ferry Authority to  create methods of                                                                    
assisting a more self-supporting  system. She noted that the                                                                    
ferry  initially  planned  a northern  route,  but  recently                                                                    
released  the route  to reduce  annual operating  costs. She                                                                    
stated that  the request  was in the  capital section  as it                                                                    
was identified  as a  named recipient  grant to  the entity.                                                                    
She  was   reluctant  to  recommend  that   the  request  be                                                                    
identified   as  an   annual   ongoing  appropriation.   She                                                                    
preferred an annual conversation  about state support of the                                                                    
effort. If  the state was  unable to support the  ferry, the                                                                    
Alaska  Marine Highway  would resume  service  to Prince  of                                                                    
Wales  Island, which  would  increase  complexity and  state                                                                    
Senator  Dunleavy  welcomed  a discussion  about  the  ferry                                                                    
9:44:29 AM                                                                                                                    
Co-Chair  Meyer  asked if  state  had  a contract  with  the                                                                    
Inter-Island Ferry Authority.                                                                                                   
Ms. Rehfeld replied  that the state did not  have a contract                                                                    
with the ferry  authority. She noted that  the Alaska Marine                                                                    
Highway  used to  travel to  the Prince  of Wales.  When the                                                                    
ferry authority  was formed in  statute, they took  over the                                                                    
responsibility.  The service  was  provided through  federal                                                                    
authorization   and  loans.   The  authority   operated  two                                                                    
vessels.  The  state provided  some  level  of general  fund                                                                    
support.  The marine  highway would  resume  service if  the                                                                    
authority  were not  able to  provide the  ferry. The  state                                                                    
expense would  increase if the  marine highway  provided the                                                                    
Senator Olson asked about the  inception of the Inter-Island                                                                    
Ferry Authority and the state subsidy history.                                                                                  
Ms. Rehfeld  replied that she could  provide varied details.                                                                    
She   stated  that   a   fairly   significant  request   was                                                                    
appropriated to  help with debt  service. She  believed that                                                                    
contributions   varied  between   $300   thousand  to   $500                                                                    
Senator  Olson voiced  concern  about  the marine  highway's                                                                    
growing deficit.                                                                                                                
9:47:14 AM                                                                                                                    
Co-Chair Meyer asked if both vessels were operating.                                                                            
Ms. Rehfeld  replied that the  authority was  operating only                                                                    
one of the  vessels. The second vessel was  available in the                                                                    
event that the operating vessel was in dry-dock.                                                                                
9:47:38 AM                                                                                                                    
Senator  Dunleavy  asked how  many  people  were taking  the                                                                    
ferry rather than  flying. He pointed out  that bridges were                                                                    
also  worthy capital  projects, especially  in the  Interior                                                                    
region of Alaska.                                                                                                               
9:48:05 AM                                                                                                                    
Ms. Rehfeld  continued on  page 2, line  12 and  the request                                                                    
from the Department of  Transportation and Public Facilities                                                                    
for   $2,408,100  for   specific   emergency  repairs.   She                                                                    
mentioned the list of the  projects that did not qualify for                                                                    
disaster funds. The goal was  to repair damaged areas due to                                                                    
flooding and ice jams, which  resulted in substantial damage                                                                    
to public  infrastructure. These  projects are  not eligible                                                                    
for  reimbursement from  the Federal  Highway Administration                                                                    
or the  Federal Emergency Management Agency.  She noted that                                                                    
a  list of  specific projects  was provided  in the  back-up                                                                    
9:48:54 AM                                                                                                                    
Ms.  Rehfeld continued  with page  3,  which introduced  the                                                                    
language appropriations. She noted  that line 16 referred to                                                                    
bill  section 6(a)  and  a request  from  the Department  of                                                                    
Environmental  Conservation  to reappropriate  approximately                                                                    
$3.4  million of  funds.  The  language would  reappropriate                                                                    
balances  from  several  smaller municipalities'  water  and                                                                    
sewer projects that were  completed under-budget, stalled or                                                                    
cancelled. The unexpended and  unobligated balances would be                                                                    
reappropriated  to the  Village  Safe  Water and  Wastewater                                                                    
Infrastructure Projects.                                                                                                        
Ms. Rehfeld moved to line  17 of the spreadsheet and section                                                                    
6(b)  of  the  bill  from the  Department  of  Environmental                                                                    
Conservation. The  department requested  a scope  change for                                                                    
rood replacement at the Tower Road Tank in Haines.                                                                              
Ms.  Rehfeld continued  with line  18 and  a reappropriation                                                                    
for  the  Department  of  Health   and  Social  Services  of                                                                    
approximately  $81  thousand   for  Eligibility  Information                                                                    
System Replacement.                                                                                                             
Ms.  Rehfeld discussed  line  19 and  the  request form  the                                                                    
Department  of  Law.  She  stated  that  the  funding  would                                                                    
provide  for  a section  of  judgments  and settlements  for                                                                    
$1,570,200. She pointed out the  list of the four settlement                                                                    
items  located in  the back-up.  She noted  line 20  and the                                                                    
language  approved   in  the  past  to   address  additional                                                                    
judgments arising in the current fiscal year.                                                                                   
9:51:18 AM                                                                                                                    
Ms. Rehfeld  moved on to  page 4,  line 21. The  request was                                                                    
from the Department  of Military and Veterans  Affairs for a                                                                    
reappropriation of approximately  $350 thousand for Alcantra                                                                    
Facilities Projects and covered storage.                                                                                        
Ms. Rehfeld  noted a second  request from the  Department of                                                                    
Military   and  Veterans   Affairs   for   an  estimate   of                                                                    
approximately $195 thousand to be  used at Eielson Air Force                                                                    
Base for covered storage.                                                                                                       
9:51:54 AM                                                                                                                    
Ms. Rehfeld  continued with line  23 and  another Department                                                                    
of Military and Veterans  Affairs request for an arbitration                                                                    
settlement  of  $111,300.  The  request  was  related  to  a                                                                    
situation at the Alaska Military Youth Academy.                                                                                 
9:52:14 AM                                                                                                                    
Ms. Rehfeld moved to page  5, line 24. The request contained                                                                    
a language section  allowing the state to cover  the cost of                                                                    
potential  spring  wildland  fires.   The  estimate  was  $5                                                                    
million, which  was similar  to the  amount included  in the                                                                    
supplemental bill last year.                                                                                                    
9:53:00 AM                                                                                                                    
Vice-chair  Fairclough referred  to page  25 of  the back-up                                                                    
documents,  which  referred to  the  item  discussed by  Ms.                                                                    
Rehfeld. She  pointed out the separate  supplemental request                                                                    
for  $22  million  discussed  earlier.   She  asked  if  the                                                                    
spending ratio was  common for the state as  related to fire                                                                    
suppression spending.                                                                                                           
Ms. Rehfeld replied in the affirmative.                                                                                         
Ms. Rehfeld continued with line  25 of the spreadsheet and a                                                                    
request  from the  Department of  Transportation and  Public                                                                    
Facilities. She explained  that the request was  for a legal                                                                    
settlement of  $100 thousand and  the associated  legal fees                                                                    
of $64 thousand.  The settlement was related  to clean-up at                                                                    
the Old-Quinhagak Airport for a total request of $164,000.                                                                      
9:53:53 AM                                                                                                                    
Co-Chair Meyer asked about the clean-up.                                                                                        
Ms.  Rehfeld replied  that a  building required  clean-up at                                                                    
the airport due to the  presence of hazardous materials. She                                                                    
stated  that  litigation  ensued  and  the  result  was  the                                                                    
judgment before the committee.                                                                                                  
Senator  Bishop stated  that  the  hazardous materials  were                                                                    
found in a former snow removal equipment building.                                                                              
9:54:48 AM                                                                                                                    
Co-Chair  Meyer opined  that the  cost of  the clean-up  was                                                                    
greater than he would have anticipated.                                                                                         
Senator  Bishop pointed  out that  hazardous materials  were                                                                    
expensive to dispose of.                                                                                                        
Ms. Rehfeld  continued with line  26 and a request  from the                                                                    
Office  of  the  Governor  to   amend  the  fuel  allocation                                                                    
percentage.  The  legislature   inserted  the  fuel  trigger                                                                    
language  several  years  ago,  which  helped  all  agencies                                                                    
address fuel  and utility costs  rather than  contributing a                                                                    
base  amount.  The  fuel   trigger  provided  for  necessary                                                                    
adjustments. She  noted past  variances in  allocations. The                                                                    
University of Alaska displayed  a shortfall. She recommended                                                                    
an increase in the university's  percentage to 15 percent of                                                                    
the total, which would help to cover their costs.                                                                               
9:56:21 AM                                                                                                                    
Ms. Rehfeld noted  a proposed reduction in  the fuel trigger                                                                    
for the  FY 15 budget.  Additional analysis  would determine                                                                    
department  impact.  She  stated that  OMB  would  determine                                                                    
whether the percentages required further adjustment.                                                                            
Co-Chair Kelly  asked if the  FY 15 budget would  reflect an                                                                    
increase in the University's  fuel allocation. He understood                                                                    
that  the committee  could not  anticipate a  final decision                                                                    
regarding the allocation when amendments were distributed.                                                                      
Ms.  Rehfeld  responded  in the  affirmative.  She  did  not                                                                    
anticipate that  the information  would be available  to the                                                                    
committee by the 30th day.                                                                                                      
Co-Chair Meyer  asked if agencies other  than the university                                                                    
were experiencing shortfalls.                                                                                                   
Ms. Rehfeld replied that the  university had the bulk of the                                                                    
requests for their statewide facilities.  She added that the                                                                    
largest  piece of  the fuel  trigger was  the Department  of                                                                    
Transportation   and   Public  Facilities   for   equipment,                                                                    
facilities  and  marine  highway needs.  She  believed  that                                                                    
adjustments   could   be   made   to   the   Department   of                                                                    
Transportation and Public  Facilities allocation. She stated                                                                    
that OMB  was relying  on further analysis  to make  a final                                                                    
9:58:48 AM                                                                                                                    
Senator  Bishop asked  for  consideration  of Fairbanks  and                                                                    
their electricity needs.                                                                                                        
Ms. Rehfeld  continued with  Line 27  and Line  28 including                                                                    
adjustments  to debt  service  related  to eligible  federal                                                                    
reimbursements for  certain series  of bonds issued.  A fund                                                                    
switch from  federal to general  fund was requested  on line                                                                    
27, while  line 28  addressed the federal  funding available                                                                    
for reimbursement of the bonds.                                                                                                 
10:00:17 AM                                                                                                                   
Ms.  Rehfeld pointed  to lines  29  and 30  with two  pieces                                                                    
related  to the  international  airports  and their  revenue                                                                    
bonds.   She  furthered   that  the   international  airport                                                                    
reviewed service  funds and construction accounts  to adjust                                                                    
for the maximum debt service cost.                                                                                              
Ms. Rehfeld discussed line 31  and a disaster relief funding                                                                    
request in the form of  a fund capitalization. The requested                                                                    
amount  was  $19,961,500.  She   mentioned  the  process  of                                                                    
notification   of  the   legislature   with  requests   when                                                                    
disasters occur. She pointed out  that $5 million of capital                                                                    
general  funds were  allocated for  the purpose  of disaster                                                                    
10:01:35 AM                                                                                                                   
Ms. Rehfeld  directed the committee's  attention to  line 32                                                                    
and  the request  for language  to  address disaster  relief                                                                    
efforts that might occur in the spring of 2014.                                                                                 
10:02:23 AM                                                                                                                   
Ms. Rehfeld spoke to line  33 and a series of ratifications.                                                                    
She stated that the ratifications  were listed on the bottom                                                                    
of page 7  of the spreadsheet extending through  page 8. She                                                                    
informed  the   committee  that  ratifications   were  zero-                                                                    
balancing. The  items were transactions  that occurred  in a                                                                    
prior  fiscal   year.  She  pointed   to  a   dollar  amount                                                                    
attributed to  funds that were disallowed  or unrecoverable.                                                                    
She   pointed  to   the  list   of  ratifications   and  the                                                                    
accompanying  appropriation number  with  a 12  at the  end,                                                                    
indicating  the  fiscal year.  She  explained  that line  42                                                                    
addressed the ratification for the  Department of Health and                                                                    
Social Services  for senior and disability  services from FY                                                                    
09.  The ratifications  were an  assortment of  transactions                                                                    
that occurred  in a prior fiscal  year. In order for  OMB to                                                                    
zero-balance the  terminated appropriations, they  must seek                                                                    
legislative approval for the ratifications.                                                                                     
10:03:46 AM                                                                                                                   
Ms. Rehfeld spoke  to line 34 and a  lapse of appropriations                                                                    
for capital projects.                                                                                                           
10:04:02 AM                                                                                                                   
Ms.  Rehfeld  noted that  line  35  referenced the  disaster                                                                    
relief appropriation,  which was placed  in a fund.  Line 36                                                                    
encompassed the effective date of the bill, April 20, 2014.                                                                     
10:04:29 AM                                                                                                                   
Vice-Chair  Fairclough referenced  tab  15, page  36 of  the                                                                    
back-up.   She  asked   about  the   ratification  for   the                                                                    
Department of Health and  Social Services Medicaid shortfall                                                                    
of  $2,820,713.   She  read   "based  on   projections,  the                                                                    
department  anticipated realizing  savings in  personal care                                                                    
and  waivers,  which  were   not  realized."  She  requested                                                                    
further explanation.                                                                                                            
10:05:42 AM                                                                                                                   
SANA  EFIRD, ASSISTANT  COMMISSIONER,  DEPARTMENT OF  HEALTH                                                                    
AND  SOCIAL  SERVICES,  stated that  the  incident  occurred                                                                    
before  her time  with the  department. She  understood that                                                                    
the department  had anticipated savings from  the waiver for                                                                    
personal  care   services  in  the  Medicaid   program.  The                                                                    
department  asked for  a decrement  because the  projections                                                                    
anticipated savings.  Since the  savings were  not realized,                                                                    
the  request  was  made  for  ratification  in  this  year's                                                                    
supplemental request.                                                                                                           
Co-Chair Meyer applauded OMB on  their efforts in creating a                                                                    
minimal supplemental  request. He understood that  the state                                                                    
could not control natural disasters.                                                                                            
Vice-chair  Fairclough clarified  that her  inquiry did  not                                                                    
have  a negative  intent. She  realized that  the department                                                                    
did  indeed  realize  a  vast amount  of  savings  with  the                                                                    
Medicaid services waivers.                                                                                                      
Co-Chair  Meyer stated  that  the  committee questions  were                                                                    
purely for education of the members.                                                                                            
Ms.  Rehfeld commented  that the  departments  were doing  a                                                                    
fantastic job managing their budgets.                                                                                           
Senator  Bishop  commented  about   his  time  working  with                                                                    
Department of Labor and Workforce Development.                                                                                  
Co-Chair   Meyer   stated   that  committee   business   was                                                                    
concluded.   He  announced   that  tomorrow's   meeting  was                                                                    
SB  155  was  HEARD  and   HELD  in  committee  for  further                                                                    

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