Legislature(1995 - 1996)
05/10/1996 10:15 AM House FIN
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HOUSE FINANCE COMMITTEE
MAY 10, 1996
10:15 A.M.
TAPE HFC SS 96 - 1, Side 1, #000 - end.
TAPE HFC SS 96 - 1, Side 2, #000 - end.
TAPE HFC SS 96 - 2, Side 1, #000 - #646.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 10:15 A.M.
PRESENT
Co-Chair Hanley Representative Martin
Co-Chair Foster Representative Mulder
Representative Brown Representative Navarre
Representative Grussendorf Representative Parnell
Representative Kelly Representative Therriault
Representative Kohring
ALSO PRESENT
Representative Ivan Ivan; Representative Alan Austerman;
Representative Con Bunde; Mike Greany, Director, Legislative
Finance Division; Nancy Slagle, Director, Division of Budget
Review, Office of Management and Budget; Annalee McConnell,
Director, Office of Management and Budget, Office of the
Governor; Karen Perdue, Commissioner, Department of Health
and Social Services; Robert Cole, Director, Division of
Administrative Services, Department of Corrections.
SUMMARY
HB 1005 An Act making, amending, and repealing
appropriations; making appropriations under art.
IX, sec. 17(c), Constitution of the State of
Alaska, from the constitutional budget reserve
fund; and providing for an effective date.
HB 1005 was HELD in Committee for further
consideration.
HOUSE BILL 1005
"An Act making, amending, and repealing appropriations;
making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
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ALL FUNDS FISCAL SUMMARY
Co-Chair Hanley spoke to the ALL FUNDS FISCAL SUMMARY passed
during the legislative session. He stated that the numbers
proposed in HB 1005 were based on that legislation.
MIKE GREANY, DIRECTOR, DIVISION OF LEGISLATIVE FINANCE,
provided a summary of general fund differences. During
regular session, four appropriation bills had been passed,
including SB 84, HB 412, HB 413 and SB 136. Mr. Greany
provided Committee members a copy of the FY 96/97 All Funds
Fiscal Summary sheet. [Copy on file]. The attachment
reflects all the appropriations made during the regular
legislative session.
Mr. Greany noted that the general fund was recapped,
indicating a general fund reduction from the FY96 authorized
budget of $73.6 million dollars. The difference reflects
the $1.2 billion dollar deposit made to the Permanent Fund
under special transfers.
HOUSE BILL 1005
"An Act making, amending, and repealing appropriations;
making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR, briefed the Committee on a
meeting held in the Senate Finance Committee which unfairly
accused members from the Office of Management and Budget.
She noted that concerns from that meeting had been raised by
individual members of the majority and she offered to
address them at this time.
She stated that the long range intent was based on
information shared with the majority. The draft resulting
from the Long Range Planning Commission had been provided to
Representative Hanley and Representative Phillips. Co-Chair
Hanley countered that there had been public testimony and
joint meetings on the Long Range Fiscal Planning issue. Ms.
McConnell disagreed, advising that "many" members of the
public were not allowed to participate or speak.
She continued, the draft of the Governor's version was
shared with Representative Hanley and Representative
Phillips in mid April, 1996. Co-Chair Hanley responded that
there had not been a final sign-off of that plan. Ms.
McConnell reiterated for the record that the information
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proposed was not a surprise to either body.
The current year budget as proposed by the Governor contains
$18.4 million dollars of reappropriation, whereas, the
budget passed by the Legislature contained only $6.8 million
dollars in reappropriation spending. She stressed that the
original request contained "good" and "valid" projects.
Ms. McConnell spoke to examples of the reappropriation
proposed by the Administration such as the Bethel seawall.
She noted that the request had been proposed by the Governor
and delivered to the Legislature during the last couple of
weeks of the Legislative session. The Children's Trust Fund
also had not been included in the final reappropriation
passed through the Legislature. Co-Chair Hanley asked when
that request had been submitted.
NANCY SLAGLE, DIRECTOR, DIVISION OF BUDGET REVIEW, OFFICE OF
MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, responded
that budget amendment had been submitted to Co-Chair
Foster's office on April 18, 1996.
Representative Grussendorf pointed out that the State of
Alaska has known about the Bethel seawall condition for a
long period of time. Ms. McConnell interjected that federal
funds have been spent and to date there remains a $5 million
dollar need. She added that Senator Stevens has authorized
continuation of the project. Co-Chair Hanley asked when
Senator Stevens had acquired the federal funding to provide
such an authorization. Ms. McConnell informed members that
those funds had been secured several years ago. In
establishing fiscal priorities, the Governor's Office was
not sure if they would be able to fund the Bethel seawall
this session. Co-Chair Hanley stressed that priorities had
changed from those proposed in December, 1995.
Ms. McConnell pointed out that reappropriation are a
"normal" part of each year's budget process. Discussion
followed regarding the base school funding and the Bethel
seawall.
Representative Mulder spoke to the Bethel seawall, advising
that the Legislature had not been presented with the request
until the end of the legislative session. He thought the
issue differed "dramatically" from the base school need.
Ms. McConnell interjected that the Bethel seawall funding
request had been presented by the Governor as a budget
amendment in mid April, 1996.
In response to Representative Parnell, Ms. McConnell
explained that $250 thousand dollars of the power project
fund had been reappropriated in the budget passed by the
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Legislature. The requested amount would be the remainder
needed. Ms. Slagle suggested that the $900 thousand dollars
identified for the two reappropriation came from an
administrative oversight. The funding source has not yet
lapsed.
Co-Chair Hanley asked if an amendment had been submitted for
the Longevity bonus. Ms. McConnell advised that information
had been determined from the last checks sent off for the
longevity checks. When those checks were run, it provided a
new estimate for the necessary amount of money needed. Ms.
Slagle pointed out that at the end of March, 1996, the
Department of Administration (DOA) presented information for
an additional supplemental request of $1.6 million dollars.
Representative Therriault questioned the amount remaining in
the Fairbanks Youth facility appropriation. Ms. Slagle
stated that balance was $43 thousand dollars.
Ms. McConnell pointed out that the items included in HB 1005
are items which had been discussed during the last couple
days of the Legislative session. The Administration is
willing to negotiate all those items.
Representative Therriault identified that the Legislature
had placed $6 million dollars into the Children's Trust
Fund; the Governor now requests an additional $2.5 million
dollars. Ms. McConnell stressed that the items contained
within the context of the legislation would be open to
negotiation. Representative Therriault responded that he
would not support an additional $2.5 million dollar addition
to that fund.
Representative Navarre reminded Committee members that the
majority members had made amendments to the budget much
later than those proposed by the Administration. He
recommended that the Committee focus on whether each
proposed project was worth consideration rather than the
timing submitted.
Inn response to Representative Kelly's question regarding
the Children's Trust Fund intent, Ms. McConnell explained
that decisions made for that spending authority are made by
the Board members of that fund. Representative Kelly
demanded that a plan be submitted.
Co-Chair Hanley summarized that the reason for the Special
Session resulted from a difference of opinion regarding
fiscal spending. He asked if the Administration would
consider placing the $2.5 million dollar Children's Trust
Fund request into the general fund in order that the savings
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not be spent. Ms. McConnell stated that the Administration
was willing to consider all options.
Representative Navarre pointed out that all departmental
budgets have received significant cuts. He requested
further information on the impact of not funding the Bethel
seawall.
(Tape Change HFCSS 96 - 1, Side 2).
Ms. McConnell disclosed that work was in progress on the
Bethel seawall. As long as there is a state-match to the
federal dollars, the work will continue.
Co-Chair Hanley briefed the Committee that it was his
intention that today's meeting provide a better
understanding of HB 1005, although, it was not his intent to
pass the bill from Committee.
Representative Kohring noted that he was a strong advocate
of cutting the budget, not adding more money into it. Ms.
McConnell offered to provide additional information
regarding the magnitude of the cuts recommended to the
budget through legislative action.
In response to Representative Parnell's inquiry regarding
the foundation formula, Ms. McConnell stated that the Board
of Education is currently investigating how to make changes
to the foundation formula. Proposals considered would
include pupil transportation.
Co-Chair Hanley indicated that Section #2 was language which
identified short federal funding and that Capital Budget
Receipts (CBR) would be used as necessary. Ms. Slagle
pointed out that Section #2 contained two portions; the
first addressing the "pay back" and the second clarifying
how to make up the shortage. She agreed that both sections
would require a 3/4 legislative vote.
Representative Martin spoke to Section #3 which would
provide for the May, 1996, Alaska Marine Highway contracts.
He asked if it had been programmed for FY97. Ms. Slagle
stated that it was a "one time" payment of $950 dollars per
employee. Section #3 and #4 were requested as part of the
FY97 monetary terms request, a one time bonus.
Ms. Slagle continued, Sections #5 and #6 were supplemental
requests for the University contracts and the Community
College Federation of Teachers contracts.
Section #7 also had been contained in the supplemental
request; $720 thousand dollars needed for the consent decree
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for the Copper River Highway. Representative Brown asked if
those funds were required immediately. Ms. Slagle advised
that there were certain things within the consent decree
that needed to take place within the next 90 to 120 days.
Ms. McConnell added, the Governor had recommended that the
issue be addressed as soon as possible. The amount of money
will not change unless, of course, delinquent penalties are
attached.
Co-Chair Hanley pointed out that Section #8 would provide
$250 thousand dollars for the Alaska Marine Highway System.
Ms. Slagle added that the request was made in conjunction
with Section #35 in an attempt to add money back. This
would be a restoration of a reduction to a budget cut
already made.
Ms. Slagle continued, Section #9a addresses extending
Medicaid services in the amount of $1.5 million dollars for
programs which provide alternatives to nursing home and
institutionalization of the elderly. Representative Martin
asked how much money was left in that lapse fund.
KAREN PERDUE, COMMISSIONER, DEPARTMENT OF HEALTH AND
SERVICES, responded that there was $3.2 million dollars in
the Medicaid lapsing funds. Five million dollars in federal
money exists which would be garnered by recycling the funds.
The extension of the lapsed dates would be oriented toward
providing basic services for the elderly and very poor
and/or gearing the Department of Health and Social Services
(DHSS) for being more cost effective in managing the
program.
Representative Brown commented on the amount of money
lapsing in the Medicaid fund. She asked why services to the
elderly and the basic poor were not being provided with
those funds. Ms. Perdue explained that there was a 5%
growth rate in the FY97 base. There is no room to expand
the services in that base. Co-Chair Hanley added, those
requests had not been submitted by the Administration. Ms.
McConnell countered that the Medicaid program is very large.
A small change in the percentage of growth will have a large
impact on what may be available.
Co-Chair Hanley asked the repercussions if the funds were
not spent. Ms. Perdue explained that those funds would
lapse back to the general fund. She added that the State
was fortunate to have the Mental Health Trust Authority
(MHTA) come forth with their own money.
Ms. Slagle continued, Section #10 through #16 all relate to
the FY97 labor contracts. The amount needed for the
bargaining units for FY97 would be $7.3 million dollars and
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$3.6 million dollars for the non-covered employees. Co-
Chair Hanley summarized the expense to the State:
$7.3 - Covered employees;
$3.6 - Non-covered employees;
$10.9 - FY97
$2 - Supplementals in previous years
______________________________________________
$12.9 - Total
Ms. McConnell added that the proposed contracts would be the
most cost effective package of contracts ever negotiated.
Co-Chair Hanley objected; including the covered costs, the
contracts would amount to $30 million dollars of increased
spending over the next three years to the State.
Representative Therriault agreed that the contracts would
not provide a savings for the State. Ms. McConnell
clarified that it would be a savings from what had been
previously negotiated, providing lower contract amounts.
Co-Chair Hanley asked if there had been a comparison made
when negotiating the contracts for base level funding. He
suggested that on an average, for a similar job class, State
employees are paid an 8% higher salary than the private
sector is paid. Ms. McConnell replied that there exists a
range of differences and that many jobs pay much less. Co-
Chair Hanley interjected, that the pay scale listing
information differences had been taken from a report
provided by the Department of Administration indicating that
in some job classes, State employees are paid 8% more, which
does not include benefits. Ms. McConnell stressed that the
pay differential had been taken into consideration in the
negotiations.
Co-Chair Foster referenced Section #19. He asked the effect
of appropriating those funds to the Department of
Transportation and Public Facilities (DOTPF) for the Bethel
seawall construction. Ms. Slagle explained if the money was
not used for that purpose, it would lapse back to the
general fund. Representative Martin noted that to date, $36
million dollars has been spent on the Bethel seawall.
Representative Therriault thought that since those funds
resulted from "electrician" money, they should be used for
electrician needs throughout the State, and not for the
seawall concern.
Ms. Slagle continued, Section #20 represents the
reappropriation requested amount of $1 million dollars for
the site preparation of the Johnson Youth Treatment
Facility. It would combine with the request provided in
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Section #37. Ms. McConnell added, a critical situation
existing in Southeast Alaska is currently having an impact
on kids and families in Southeast Alaska and also on the
facilities in Fairbanks, Bethel and Anchorage. The
Administration believes that Aid to Families with Dependent
Children (AFDC) lapse money would be an appropriate use for
those lapsed funds.
Co-Chair Hanley advised that this was an original Governor's
budget request which was not funded by the Legislature.
Representative Mulder agreed that a need exists within the
State, although he did not feel that it was limited to
Southeast. Commissioner Perdue elaborated that the Johnson
Center has been designed and has been ready for the past six
years. It is currently under a contempt order issued by
Judge Weeks. Funding the request would be the most
expedient way to address the over-crowding issue in the
State. She emphasized that this is a "number one priority".
Representative Mulder replied that the entire State is
"bursting at the seams".
(Tape Change HFC 96 - 2, Side 1).
Commissioner Perdue spoke to Section #21 which would repay
the State for health services provided in the schools by the
federal government. The money would allow the school
districts to apply for community based grants to work with
families at risk.
Ms. Slagle stated that Section #22 would reappropriate an
anticipated balance for the Longevity Bonus grants to the
Department of Administration for the continuation of the
personnel automation and for developing changes to the
State's personnel management system. Co-Chair Hanley noted
that the Legislature over-appropriated the Longevity Bonus
by an amount of $300 thousand dollars. Ms. McConnell added
that Senator Frank had proposed a possibility of the
automation computer system. She agreed that the project had
not been submitted to the Legislature as a request.
Ms. Slagle continued, Section #23 would address the need
within the Department of Corrections for the conversion of
Harborview to a correctional facility.
ROBERT COLE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF CORRECTIONS, stated that the facility would
handle medium level offenders. The premise would be to pull
offenders from prisons across the State and place them in a
therapeutic situation at Harborview.
Representative Mulder questioned the cost per day. Mr. Cole
replied the cost per day would be $177 dollars with a total
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cost of $3.2 million dollars per year. This year, the U.S.
Congress appropriated money for alcohol and drug abuse
programming funds for all the states. Representative Mulder
disclosed that the cost was too expensive. Mr. Cole
explained that the direct cost of intervention will be more
expensive than the basic care costs of a prisoner; an
enriched program will often allow early release. The intent
of intervention would be to end re-offense. Representative
Mulder requested supporting documentation.
Ms. Slagle continued, Section #24 would provide $750
thousand dollars of interest from the criminal restitution
funds from the Exxon settlement to be used for a visitor
interpretive facility. The interest money accumulates.
There has been other projects completed with these funds and
the projects must be associated with the spill.
Representative Therriault suggested that a better use of
those funds would be to offset general funds wasted on the
Whittier Road.
Ms. Slagle added, Section #25 would provide funds to be
appropriated to the Department of Natural Resources (DNR)
for the State land status geographic information system.
Ms. McConnell added that the proposal had not been the full
amount requested in the Governor's original request. She
added, it was a high priority for the Department and would
enable them to utilize it for economic development.
Section #26 would identify $400 thousand dollars of
anticipated carry-forward for the Governor's Office to be
included in the base for executive operations for FY97.
That amount had been reduced in Conference Committee. Co-
Chair Hanley pointed out that money had been rolled forward.
Ms. Slagle continued, Section #27 represents the Alaska
Public Utilities Commission (APUC) designated program
receipts account for regulatory cost charges in order to
meet its duties under the Federal Telecommunications Act of
1996. That balance is $400 thousand dollars; the lapsed
need would be $200 hundred thousand dollars.
Section #28 deals with HB 412 which was adopted without an
effective date. The request would provide an effective date
of July 1, 1996, in order to provide effective operations
for the State of Alaska.
Section #29 would address the disparity problems with the
foundation formula. It would provide a temporary fix for
FY96; although, would not address FY97 problems. Co-Chair
Hanley asked if the Governor would add SB 244 to the agenda
for the Special Session. He thought that bill could address
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concerns regarding the disparity problem. Ms. McConnell
replied that the Governor has indicated that he will discuss
with Legislative Leadership expanding the call for Special
Session. He felt that there were a number of issues "left"
in limbo. The Governor's intent is to address the primary
matters first. She suggested that passage of SB 244 will
not fix the budget at this time. The Governor has expressed
his willingness and interest with the Legislature to address
concerns on the table. Heated discussion followed among
Committee members and the Administration regarding the
concerns of leverage used by both bodies during the Special
Session to get "interests" accomplished.
Representative Therriault questioned the impact in not
appropriating the amount of funding requested in SB 244.
Co-Chair Hanley replied that $35 million dollars in federal
funds were at risk. Representative Therriault identified
that as a high risk gamble. Ms. McConnell stated that
passage of Section #29 provision would guarantee that the
money not be lost.
Representative Parnell asked if the Governor supported HB
1005. Ms. McConnell replied that the Governor will discuss
all concerns as soon as the budget issues are addressed.
Representative Parnell inquired if additional requests were
anticipated for special funding during the Special Session.
Ms. McConnell stated that there could be some technical
corrections.
Representative Grussendorf noted that he did not support all
items included in HB 1005. He suggested that there was room
to negotiate. Representative Brown asked what other items
are currently under discussion. Ms. McConnell replied that
the Administration has concerns with the Municipal Revenue
Sharing bill (SB 20) and other items and requests in the
limbo file. Co-Chair Hanley concluded that the Leadership
has interest in the disparity bill.
HB 1005 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 12:20 P.M.
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