Legislature(2001 - 2002)
01/26/2001 01:38 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
January 26, 2001
1:38 PM
TAPE HFC 01 - 20, Side A
TAPE HFC 01 - 20, Side B
CALL TO ORDER
Co-Chair Mulder called the House Finance Committee meeting
to order at 1:38 PM.
MEMBERS PRESENT
Representative Eldon Mulder, Co-Chair
Representative Con Bunde, Vice-Chair
Representative Eric Croft
Representative Richard Foster
Representative John Harris
Representative Bill Hudson
Representative Ken Lancaster
Representative Jim Whitaker
MEMBERS ABSENT
Representative Bill Williams, Co-Chair
Representative John Davies
Representative Carl Moses
ALSO PRESENT
David Teal, Director, Legislative Finance Division; Denny
Dewitt, Staff, Representative Eldon Mulder; fiscal analysts
for the Legislative Finance Division.
SUMMARY
HB 45 "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, from the
constitutional budget reserve fund; and providing
for an effective date."
HB 45 was heard and HELD in Committee for further
consideration.
HB 46 "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."
HB 46 was heard and HELD in Committee for further
consideration.
HB 47 "An Act making capital appropriations and
capitalizing funds; 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 47 was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 45
"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, from the constitutional budget
reserve fund; and providing for an effective date."
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION provided
members with information regarding the Governor's FY 02
budget. The function of the Legislative Finance Division is
to help the legislature through the budget process. He
encouraged members to access the Division's website
http://www.legfin.state.ak.us/ and noted that it can
utilized along with the Office of Management and Budget's
site.
Mr. Teal provided members with a handout: The Fiscal Year
2002 Budget: legislative fiscal analyst overview of the
governor's request (copy on file). He reviewed the graph on
page 5 of the handout - General Fund Unrestricted Revenue
vs. General Fund Appropriations. He noted that FY01 nominal
general fund appropriations are at the same level as they
were in 1988 and 1998. Current appropriations are at
approximately half of what they were during the oil boom
years of the early 1980's. Revenues and appropriations are
volatile but both are on a downward trend. Alaska is the
only state that has declining general fund appropriations.
This decline would be reversed by the Governor's FY02
budget. He stressed that although general fund
appropriations are declining they still exceed general fund
revenues. There has been a draw from the Constitutional
Budget Reserve every year since 1991, except for 1997 when
money was withdrawn and paid back.
Mr. Teal observed that FY01 was the final year of a 5-year
plan to eliminate the fiscal gap. He noted that the gap was
closed in FY01, but acknowledged that the price of oil has
been high at $30 dollars a barrel. The gap opens again in
FY02.
Mr. Teal reviewed page 6: Fiscal Summary - FY01/FY02. He
noted that the there is a $500 million dollar decline in
revenues and a $155 million dollar increase in
appropriations. This results in a fiscal gap of $530 million
dollars in FY02. The operating budget is up about $97
million dollars. The capital budget is up approximately $30
million dollars. Debt service and other appropriations are
up approximately $28 million dollars.
Mr. Teal reviewed page 7 (continuation of the fiscal
summary). The total FY02 budget is $7,237.1 billion dollars,
which is an increase of $263.7 million dollars over FY01. He
noted that due to increasing population a smaller permanent
fund dividend is expected for the current year.
Representative Croft asked for additional information on
language appropriations. Mr. Teal explained that the
language section is used to make appropriations when
explanations are required. Representative Croft observed
that $25 million dollars is needed for additional debt
service. Mr. Teal discussed debt service. The Anchorage jail
was presented as debt service in the Governor's budget. He
observed that the state of Alaska would never own the
Anchorage jail. Therefore this item was moved to the general
fund budget. Representative Croft reviewed the breakdown of
new spending.
Vice-Chair Bunde noted that the projected surplus is
dependent on the estimate of $30 dollars a barrel for oil.
He questioned where the state would be with the current
average. Mr. Teal explained that for every change per dollar
there would be a $65 million dollar impact to the general
fund. The price of oil retained its $30 dollar value in the
first half of the fiscal year. If it were reduced to $25
dollars a barrel the budget would be balanced.
Vice-Chair Bunde clarified that the total budget excluding
permanent fund dividends would be $5,351.1 billion dollars
in FY02. Of this amount, $2.4 billion dollars would come
from general fund revenues and $1.95 billion dollars would
be derived from federal funds. This portion is up slightly,
while the capital budget is down slightly. There is also an
increase in entitlement payments for Medicare.
Vice-Chair Bunde responded to constituent complaints that
the state spends too much per capita. He pointed out that
the per capita amount could be reduced if the state returned
its federal funds.
Representative Hudson referred to page 6. Mr. Teal explained
that interagency receipts appear in the department where
they originate and are reflected in the department into
which they are transferred. This duplicated amount is backed
out of the budget.
Mr. Teal discussed other funds. There is approximately $1
billion dollars in other funds, which is down $40 million
from FY01. The reduction is the result of AHFC bonds that
were issued in FY01. They were replaced by airport revenue
bonds.
Co-Chair Mulder noted that revenue assumptions for FY02 are
based on a $6 dollar per barrel drop in projected oil
prices. Mr. Teal noted that projected production is slightly
higher in FY02.
Mr. Teal reviewed differences between the budget analysis by
the Legislative Finance Division and the Office of
Management and Budget (OMB). The summary by the Legislative
Finance Division shows that the fiscal gap is $10 million
dollars greater than OMB's estimate ($155 million dollars).
He explained that the Office of Management and Budget
counted Investment Loss Trust funds and CBR direct
appropriations as general funds. The Legislative Finance
Division counts these as other funds in this year's fiscal
summary, in order to be consistent with their inclusion as
other funds in the legislation. Last year there were $6.2
million dollars of Investment Loss Trust funds available for
appropriation. In FY02, there are approximately $150
thousand dollars after management fees.
Co-Chair Mulder explained that the state of Alaska made the
retirement account whole during a time of bad investment. In
doing so the state took over the invested junk bonds that
the state thought were annuities and the Investment Loss
Trust Fund. Mr. Teal observed that the money available to
the state from this source is declining.
Ms. McConnell explained that portions of the trust fund are
being released, as some of the investments have been made
good and the funds are not needed to cover retiring
employees.
Mr. Teal clarified that Investment Loss Trust Funds have
traditionally been counted as other funds in the
appropriation bill, but considered as general funds in the
fiscal summary. The Legislative Finance Division concluded
that to be consistent these funds should be considered as
other funds in the fiscal summary. The Administration has
continued to count the $6.2 million dollars in Investment
Loss Trust Funds as general funds in the FY01 fiscal
summary. The Legislative Finance Division's fiscal summary
counts these as other funds. This accounts for $6.2 million
dollars of the $10 million dollar difference.
Mr. Teal discussed other accounting discrepancies. The
Office of Management and Budget did not count section 27,
which is a $3.9 million dollar social services block grant,
because it is a contingent appropriation to be used only if
there is insufficient federal funding for the program. The
Legislative Finance Division also counted $2 million dollars
for fire suppression and some duplicated funds. The
differences are minor. Differences are easy to account for.
Technically the governor's budget was well done.
Mr. Teal noted that the fiscal summary also included debt
service and transfers. There is a fairly substantial
increase in capitalizing the Debt Retirement Fund: from $9.3
million to $34 million general fund dollars. The only
significant increase was in school debt service. The Debt
Retirement Fund has been drained over the years and has
virtually no money remaining. The draw on the fund will
equal the amount deposited. The net balance will be close to
zero. There were no big changes in the capital budget or the
Oil and Hazardous Waste Fund.
In response to a question by Representative Croft, Mr. Teal
noted that most of the other funds are from the
International Airport Fund. Debt service does not contain a
significant amount of federal funds. He noted that cigarette
taxes are dedicated to the school fund. He added that 40
percent of the future tobacco revenue stream was diverted to
AHFC. Medicaid is missing $10 million dollars in general
funds that were diverted to AHFC for bond payments.
Co-Chair Mulder observed that the tobacco settlement funds
have not been line itemed by the Legislature as was done in
the Governor's budget. Mr. Teal explained that the tobacco
settlement money was directed to Medicaid. The Legislature
treated the tobacco settlement funds as pure general funds.
Vice-Chair Bunde thought that concern had been expressed on
the federal level that not much of the funding is being used
for cessation efforts. Mr. Teal thought that the issue had
been resolved. There are no restrictions on state spending.
Mr. Teal reviewed page 13-position comparison. He noted that
there is an increase of approximately 900 positions in the
Governor's FY01 authorized amount. The increase from the
FY01 management plan is 650. Mr. Teal noted that the largest
increases were in the Department of Administration due to
pioneer homes; the Department of Corrections due to the
Anchorage jail; and the Department of Health and Social
Services due to an increases in social work and juvenile
justice. Representative Croft noted that the positions
included non-general fund support.
Co-Chair Mulder noted that the Legislature can cut funding
but has little ability to reduce positions. Mr. Teal agreed
that the executive branch is free to add and change
positions. The legislature controls the funding.
Representative Croft noted that positions could be funded
through a variety of funding mechanisms. Mr. Teal observed
that the Governor's budget includes increases in social
services and alcohol programs. Positions were associated
with the $80 million dollar general fund increase. Co-Chair
Mulder noted that the position count could increase even as
general funds decrease if positions cost less. He emphasized
that it is a management function of the governor.
Representative Hudson questioned how many of the new
positions were authorized as one-time positions in FY01. Mr.
Teal noted that one-time funding is a complicated issue. He
concluded that there was one-time money spent in FY01
through reappropriations, the Investment Loss Trust Fund,
AIDEA dividends and AHFC dividends that are not supported in
FY02. The Governor's budget replaces that funding with
general funds. This accounts for part of the $150 million
dollar increase. He observed that reductions in oil revenues
could be considered as one-time.
Mr. Teal referred to the Agency Summary on page 18. Co-Chair
Mulder asked for a summary of page 16 - formula funded
programs. Mr. Teal discussed formula funded programs.
Formula increases account for approximately $20 million
dollars. He noted that formula programs, once eligibility is
defined, become an entitlement. Public school funding (which
is driven by student count) and Medicare (which is driven by
eligibility) are the two largest formula programs. Formula
programs account for approximately half of the operating
budget.
Co-Chair Mulder explained that the Governor generally
submits the previous year's number as the baseline for the
school count.
Representative Croft questioned if the baseline for the
school count would be in the ballpark.
TAPE CHANGE, HFC 01 - 20, Side B
Co-Chair Mulder thought that the estimate would be close.
Mr. Teal further explained that local contributions and
federal impact aid affect the appropriation. Property values
are going up statewide, which increases local contributions.
Local contributions have a one to one offset on state aid.
Co-Chair Mulder concluded that the rise in local
contributions, federal impact aid and the decrease in
enrollment all work to lower the public school foundation
appropriation. There are a number of proposals to change the
formula.
Representative Croft referred to Medicaid costs. Mr. Teal
stressed that Medicaid costs increase yearly, partially due
to prescription drug costs. There are also more people
eligible in FY02. He concluded that the increase in general
fund requirement is not unusual.
Mr. Teal observed that the general fund budget is
approximately $1 billion dollars once other funds are
subtracted.
Mr. Teal reviewed page 19 - discussion of language sections.
He observed that the majority of the language appropriations
are debt capitalization and the total is less than $4
million dollars. The social services block grant accounts
for $3.8 million dollars of this amount.
HB 45 was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 47
"An Act making capital appropriations and capitalizing
funds; 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."
Mr. Teal discussed the capital budget (page 42 of the
Legislative Finance Divisions Overview). There is an
approximately $1.2 billion dollar capital budget in FY02,
which is comparable to FY01's. The capital budget is down
$20 million dollars in federal money and up $30 million
dollars in general funds. The state's capital spending is
comparable to the amount spent during the oil revenue peak
in FY85. Most that of the spending is through the Department
of Transportation and Public Facilities $2 million of the
increase. Most of the change in spending from FY01 to FY02
is outside of the Department of Transportation and Public
Facilities.
Representative Whitaker asked how FY02 matching funds are
used. Mr. Teal responded that the match varies depending on
the program. Representative Whitaker asked if the federal
appropriation is known. Mr. Teal stressed that the federal
amount is never certain. He explained that the Department of
Transportation and Public Facilities requests additional
federal authorization in case additional federal funding
becomes available. Federal funding to other states, which is
not utilized is reappropriated to states where projects are
ready.
Mr. Teal reiterated that the net decrease was due to a $40
million dollar difference in AHFC bonds. Representative
Croft concluded that there is not a real decrease in funded
capital projects. Co-Chair Mulder added that voters did not
approve some of the bonds authorized. The net impact on the
state's economy was minimal.
In response to a question by Representative Hudson, Mr. Teal
clarified that state matching funds for federal projects are
not tied to particular projects.
Mr. Teal noted that there is less than $6 million dollars
appropriated in the language section; $4.8 million dollars
is appropriated to Power Cost Equalization.
Vice-Chair Bunde expressed the hope that the Power Cost
Equalization program will be self-sustaining. Mr. Teal noted
that the program needs approximately $15.7 million dollars
per year. An endowment was created in FY01. Not all of the
transfers were made to the endowment. The endowment is not
large enough to generate full funding for PCE. The
appropriation is approximately $7.8 million dollars short.
The shortfall will be covered by $2.5 million dollars in
AIDEA dividends, $620 thousand dollars from sale of loans
and $4.6 million dollars in general funds. The general fund
requirement should be approximately $2 million dollars in
FY03. Mr. Teal clarified that slow loading of the endowment
caused the shortfall.
HB 47 was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 46
"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."
Mr. Teal discussed mental health funding. He explained that
the Alaska Mental Health Trust Board evaluates each project
each year and to determine if they want to continue and at
what level. Mental health projects are demonstration
projects. Trust funds are replaced with general funds as
projects are shown to be successful. The Mental Health
Board's request is for $14 million dollars in MHT receipts
and $137 million dollars in general funds. He observed that
the Governor rejected some requests and added others. The
net is slightly lower than the request. If the legislature
changes the Governor's request the change must be explained
to the Alaska Mental Health Trust Authority Board.
In response to a question by Co-Chair Mulder, Mr. Teal
explained that the Legislative Finance Division has a
spreadsheet, which compares the Mental Health Board's
request to the Governor's submission.
In response to a question by Representative Hudson, Mr. Teal
clarified that, while the legislature has not "rubber
stamped" the Board's recommendations, the legislative
changes have been minor. Changes have been worked out with
the Board and the Board has always been involved in the
discussion. There are some mental health projects in
Department of Corrections and Department of Administration,
but most of the appropriations are in the Department of
Health and Social Services.
HB 46 was heard and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 2:48 p.m.
| Document Name | Date/Time | Subjects |
|---|