Legislature(2009 - 2010)HOUSE FINANCE 519
01/27/2009 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Legislative Finance Division – Budget Overview | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
HOUSE FINANCE COMMITTEE
January 27, 2009
1:33 p.m.
CALL TO ORDER
Co-Chair Hawker called the House Finance Committee meeting
to order at 1:33:48 PM.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Vice-Chair
Representative Allan Austerman
Representative Harry Crawford
Representative Anna Fairclough
Representative Richard Foster
Representative Les Gara
Representative Reggie Joule
Representative Mike Kelly
Representative Woodie Salmon
MEMBERS ABSENT
None
ALSO PRESENT
David Teal, Director, Legislative Finance Division; Jeff
Jessee, Chief Executive Director, Alaska Mental Health Trust
Authority; Laraine Derr, Vice Chair, Alaska Mental Health
Trust Authority
PRESENT VIA TELECONFERENCE
SUMMARY
^Legislative Finance Division - Budget Overview
Alaska Mental Health Trust Authority - Budget Overview
1:33:56 PM
Co-Chair Hawker called the meeting to order for the
Legislative Budget and the Alaska Mental Health Trust
overviews. He reported that this year the committee has
instituted real-time document availability on the web. When
documents become available to the committee, they are
simultaneously accessible on the the State of Alaska, BASIS
site.
1:37:58 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, reviewed
his agency's responsibility to analyze the budget then
provide assistance to the legislature in shaping the
governor's requests. He remarked that after receiving the
governor's budget his division spends the next month
ensuring that the technical details are correct. The
division generates a series of reports to look at the budget
from the larger overview to ever increasing detail. Mr. Teal
referred to four charts in The Fiscal Year 2010 Budget:
Legislative Fiscal Analyst's Overview of the Governor's
Request, House Finance Committee, January 27, 2009 (copy on
file).
1:42:30 PM
Mr. Teal remarked that it is possible to see potential
unprecedented fiscal gaps in the future. He noted the good
news that there is about $8 billion in reserves but
cautioned how quickly this could be spent down without the
addition of new savings. He warned that in FY09 the fiscal
gaps are real with the result of a likely deficit.
1:44:05 PM
Co-Chair Hawker asked for a brief description on how to read
the FY10 General Fund Revenue-Fiscal Sensitivity chart.
1:44:45 PM
Mr. Teal pointed out that the top horizontal line
represented the $74 per barrel break-even point and the
curved green line represented the revenue at various prices
per barrel. As the price increases, revenue will in turn
increase. He noted that the curved function line is a result
of a change to a progressive profits tax.
1:47:03 PM
Vice-Chair Thomas asked about a reference to a one billion
dollar deficit and wondered if these charts were made before
that prediction.
1:47:26 PM
Mr. Teal believed the one billion dollar deficit referred to
FY09. In looking at the FY09 General Fund Revenue Chart 2,
it reflects a budget of $7 billion. The first half of the
year experienced high oil prices but figures shown at the
bottom reveal what would happen if it was spent at a lower
per barrel price for the next six months. The chart shows
that oil must be at $78 per barrel for the remainder of the
year to break even for the fiscal year. Mr. Teal commented
that at the present average of $40 per barrel there could be
a deficit approaching $2 billion. He believed the
administration was looking at revenue in the $50 per barrel
range which would translate into a one billion dollar
deficit. He stressed that the charts are not particularly
accurate because they do not reflect the volatility of
revenue when looking at the average for the year.
1:49:54 PM
Representative Gara asked if the FY09 chart showed the
operating, capital and supplemental budgets combined.
1:50:14 PM
Mr. Teal responded that there are no supplementals yet for
FY09. Representative Gara asked if the FY10 chart reflected
the governor's combined capital and operating budgets. Mr.
Teal responded that it showed the entire budget.
Representative Gara asked about the proposed capital budget.
1:51:09 PM
Mr. Teal disclosed that this year a clearer, simpler and
more informative way to present the budget was agreed upon
by The Office of Management and Budget and Legislative
Finance. He referred to State of Alaska-General Fund Budget
History, Chart 4 (copy on file). This chart shows general
fund revenues and expenditures since FY75. The solid
fluctuating green line reflects revenue which peaked in
FY08. He pointed out that savings, represented by the yellow
line at the top of the bars, clearly showed that savings
only occurred when there was available money. In the early
80s savings grew but as oil revenue declined, followed by
flat growth through FY055, there were no savings. When oil
prices rose again in FY05, savings climbed but by FY10
negative savings are shown. The capital appropriation budget
follows a similar pattern to savings (the black line on the
bar). Mr. Teal declared that when revenue climbs the capital
budget grows, when revenue is flat, the capital budget is
small. In FY05 when revenue returned the capital budget
became substantial but has since dropped off.
1:55:49 PM
Mr. Teal continued with his explanation of the statewide
operations. He explained when loan funds were capitalized,
during the big oil boom of the 80s; it was high because of
the Government Obligation (GO) bonds debt service and as
these bonds were paid off, statewide disappears. New bonds
issued in FY03 caused a jump in statewide operations because
of oil and gas credits at $300-400 million a year, the
retirement payments of $450 million per year and FY09
resource rebate of $750 million. Mr. Teal moved to the
bottom base bar reflecting the agency operating section that
most people think of when the term "budget is used. He
pointed out the pattern for an agency operation is
different. It does increase when there is revenue but it
also stays up when revenue is down. This pattern often
causes the legislature to be mischaracterized as spending
too much but the legislature saved a lot of money when
revenue was high. The way the budget is reported makes it
hard to differentiate a savings appropriation from a
spending appropriation. This is part of the reason for the
redesign of the fiscal summary because it was hard to
interpret the numbers when there were savings.
1:59:24 PM
Mr. Teal referred back to the State of Alaska Fiscal
Summary, Current Fiscal Year Appropriations, page 3, line
11. He noted that the far right column reflects changes to
the general fund expenditures. He showed that the agency
operating budget is $92 million higher in FY10 then in FY
09. He explained that $51 million was K-12 formula but what
might be difficult to see is the $31 million salary
increases. This means that $85 million of the $91 million
increase was predetermined by legislative action last year.
Two important objects are fuel and power costs equalization.
In FY09 the fuel trigger was $44 million, but in the FY10
budget the governor reduced it to $24 million. This reflects
a $20 million reduction in the operating budget. Mr. Teal
also alleged during the special session that the Power Cost
Equalization (PCE) received an extra $23 million not
reflected in the FY10 budget leaving $45 million that
appeared last year but not in the FY10 budget. Mr. Teal
moved to statewide appropriations showing a reduction of
$840 million but $750 million is due to the resource rebate
and another $100 million due to reducing oil tax credits
from $400 million to $300 million.
2:02:18 PM
Representative Gara asked if the Fund Capitalization, on the
State of Alaska Fiscal Summary chart 3, line 22, showing a
reduction from $790 million to $34 million, was the resource
rebate. Mr. Teal agreed. Co-Chair Hawker added that the fund
capitalization includes the resource rebate with other funds
involved.
2:02:47 PM
Mr. Teal remarked that the capital budget fell by $113
million with a $234 million withdrawal from savings; most of
it came from $238 million indicated on line 53 from the
House Finance Committee (HFC) savings account. The $300
million deposited in FY07 in the HFC savings account was set
aside to avoid the CBR fund. Mr. Teal revealed that the
governor proposes to withdraw $238 million from that fund
and spend it. The traditional way to show withdrawal from a
fund is to classify it as "other" funds because it had
already been recorded in FY07 as an expenditure of general
funds. This would be a zero in expenditures because it has
already been counted. He explained that the finance chairs
prefer the legislative finance method of showing that the
money was put into the savings account as a parking place
but when money is withdrawn it should be shown as a
withdrawal from savings then spending the money as general
funds. Therefore the legislature shows a capital budget that
is $240 million higher in general funds than the governor.
2:05:35 PM
Representative Gara remarked that there was a big capital
budget appropriation funding a number of projects vetoed by
the governor the year before in a supplemental bill that is
not reflected in FY09 expenditures. He was curious how much
money was involved in that supplemental bill.
2:06:33 PM
Mr. Teal agreed that for the last several years money is
spent according to the amount of money that was believed to
have existed but next session more money is discovered. He
remarked that for the last couple of years there have been
substantial capital budgets.
2:07:47 PM
Co-Chair Hawker remarked that the supplemental capital
seemed to have a large number but it did include the money
that went into weatherization and other programs.
Representative Gara asked how much money was spent on
capital last year.
2:08:43 PM
Mr. Teal responded that the Constitutional Budget Reserve
(CBR) sweep is distorting the picture. If money was not owed
to the CBR fund there would be no sweep because any money
would simply be left in the general fund. He did not believe
there would be a supplemental capital budget this year.
2:10:49 PM
Co-Chair Hawker asked Mr. Teal to make available for
Representative Gara the summary spread sheet of the
supplemental appropriation bill that included the $3 billion
into savings in the CBR in addition to the weatherization
grants.
2:11:29 PM
Mr. Teal continued that the bottom line showing a surplus of
$150 million, and after savings $380 million, is likely to
go negative when the new forecast is released. He indicated
that the legislature has several options including
increasing revenue, spending less, or using reserves. The
easy solution is to spend reserves with the understanding
the money will not last forever. Mr. Teal recalled that
Alaska has never been successful in implementing personnel
taxes, leaving a final option of spending less but he did
not see a way to cut the budget to close the fiscal gap.
Co-Chair Stoltze noted that the lack of success in
implementing taxes has been due to lack of effort or desire.
2:14:45 PM
Mr. Teal responded that taxes proposed in the past have not
had a welcome reception in the legislature. He proposed an
example that if oil was at $55 a barrel in FY10 then there
would be expected $3 billion revenue which would translate
to the amount in the FY05 and FY06 budgets.
2:16:13 PM
Co-Chair Hawker responded he will be asking subcommittees
not just look at the single increments but to revisit the
creeping growth of programs over the past three years.
Mr. Teal responded that when looking back at the FY05 and FY
06 figures it was before the $450 million to retirement and
the $400,000 in tax credits. Again he reiterated that he did
not believe it was possible to cut the way out of the
deficit.
2:18:21 PM
Co-Chair Hawker believed it was possible to cut the way out
of the deficit but it may not be the proper course of
action. Representative Joule cautioned when cost cutting has
occurred before it ended up costing more money.
2:20:32 PM AT EASE
2:25:45 PM RECONVENED
Alaska Mental Health Trust Authority - Budget Overview
JEFF JESSEE, CHIEF EXECUTIVE DIRECTOR, ALASKA MENTAL HEALTH
TRUST AUTHORITY, presented a brief history of the Alaska
Mental Trust, The Trust, The Alaska Mental Health Trust
Authority, Fact Sheet (copy on file). He remarked that in
1982 a lawsuit stated that the trust was not fulfilling its
obligations due to mismanagement of the land and money. The
State Supreme Court in 1984 ordered the original trust
restored and in 1994 one million acres of land and $200
million in cash reconstructed the original trust. The trust
is governed by an independent board of trustees appointed by
the governor and confirmed by the legislature who manage
trust interests and spends the trust income.
Co-Chair Hawker signified that one of the issues in front of
the legislature this year is instate gas development that
involves mental health trust lands. Mr. Jessee agreed that
mental health land is involved in Alaska's resource
development in gas, coal, and timber.
2:30:42 PM
LARAINE DERR, VICE CHAIR, ALASKA MENTAL HEALTH TRUST
AUTHORITY revealed that she is also the head of the trust
finance committee. She listed the present board of directors
and the governor's recent appointment of two new members,
Mary Jane Michael and Dan Hoffman. Ms. Derr referred to her
PowerPoint presentation, House Finance Committee FY 2010
Budget, Alaska Mental Health Trust Authority, January 27,
2009 (copy on file). She listed the Trust Beneficiaries on
page 2. She indicated that the staff had been directed to
provide data showing what is being done for the
beneficiaries and its effectiveness.
Mr. Jessee referred to the Alaska Scorecard, Key Issues
Impacting Alaska Mental Health Trust Beneficiaries, December
2008 (copy on file). This yearly report describes the status
of the beneficiaries. He noted at the bottom of the page the
list of the trust beneficiary population in Alaska.
2:33:03 PM
Ms. Derr listed the outside boards that help advise the
trust, Trust Advisors, page 3. The trust based their $27
million budget on an endowment projection of $460 million at
four percent in September 2008 but has seen it erode to $21
million (p. 4).
2:35:14 PM
Co-Chair Hawker referred back to the Alaska Scorecard and
questioned why "needs improvement" was listed in almost all
areas. Mr. Jessee agreed that improvements have been made
but noted there were as lot of behavioral and mental health
issues in the state.
2:37:00 PM
Representative Fairclough asked if the website gives
information on where the information was drawn. Mr. Jessee
stressed that by entering the website detailed information
was available on the specific data sets used. Representative
Fairclough questioned where the majority of the data was
drawn. Mr. Jessee responded that page 2 of the Alaska
Scorecard reveals many of the sources used for statistics.
2:38:22 PM
Representative Joule suggested that more than just looking
at the drill down, the trust needs to look beyond the
problem and look at the core issues behind addictions.
Mr. Jessee affirmed that the trust and partner boards look
at core issues such as cultural dislocation, economic
difficulties, and historical trauma, not just the symptoms.
2:41:01 PM
Representative Gara remarked he would like to see
substantial progress in areas of alcoholism and substance
abuse but noted that there were so many different providers
around the state trying to deal with this problem. He
wondered if there was any sort of comprehensive blueprint
for the state to use in tackling this problem.
Mr. Jessee replied that there is no coordinated statewide
vision of how to deal with substance abuse problems. If the
legislature would like to move in that direction, the
Department of Health and Social Services and the governor
view alcohol abuse as a priority. The trust is working with
the Rasmussen Foundation, the state, and tribal entities to
put together a unified vision for solving the problem.
2:44:22 PM
Co-Chair Hawker described the difficulties he has seen over
the years without a unified vision. He noted the territorial
fights within agencies have often caused the problems in
arriving at a statewide vision.
2:45:23 PM
Representative Gara asked what legislators should do to
support a more comprehensive blueprint.
Mr. Jessee suggested supporting the Department of Health and
Social Services (HSS) in implementing their priority on
addressing the issue. He also mentioned bringing the
Advisory Board on Alcohol and Drug Abuse and the Mental
Health Board as well as the private sector forward to review
their plans.
Representative Gara elaborated that he is just trying to get
an idea what the state is doing. He asked if the funding has
been reduced in these programs. Mr. Jessee responded that in
the last couple of years there have been additional
resources added to programs but still not at the level to
meet the true need. Representative Gara agreed that funding
had been added in the past but wondered if less is being
done today.
2:48:09 PM
Mr. Jessee replied that over the past six years the funding
remained even but he reminded the committee that even when
money increases so do medical expenses. He added that
substance abuse program are not reimbursed by Medicaid at
anywhere near the level of mental health.
2:49:02 PM
Ms. Derr continued with the Trust Funding FY 2010, p. 5
showing that the trust fund payout of 4.25 percent equaled
$15 million for next year when there had been an anticipated
$20 million. This money, with the prior year lapse, land
office income, and interest equaled a total trust projection
of $21,854,253.
2:50:15 PM
Mr. Jessee listed the Joint FY 2010 Legislative Priorities,
page 6. He emphasized the necessity in community coordinated
transportation systems.
2:52:16 PM
Vice-Chair Thomas added that the community of Haines uses
school buses for community transportation.
2:52:56 PM
Mr. Jessee declared that a great idea, but emphasized the
necessity of dealing with liability issues in rural school
districts to use the existing buildings and transportation
for community programs. Co-Chair Stoltze commented the same
issue exists in Anchorage. He noted the exit on the board of
Mr. Hawkins who he considered one of the most knowledgeable
members of land issues and natural resource development and
believed more of such board members are needed.
Mr. Jessee responded that there are still very experienced
board members moving aggressively on natural resource
development.
2:57:19 PM
Vice-Chair Thomas noted he represents a district that lost
jobs from natural resource slowdowns particularly in the
fishing and mining industry. He fears job loss during the
present economic downturn will accelerate issues of domestic
violence, lost homes, and incarceration.
2:59:09 PM
Mr. Jessee revealed his excitement hearing legislative
support in developing more from natural resources jobs. His
goal would be to hire trust beneficiaries and put them to
work on some of these projects.
2:59:53 PM
Vice-Chair Thomas believed that a key problem was
unemployment. He also mentioned veterans with post traumatic
stress syndrome that have been turned away from employment.
Mr. Jessee interjected another veteran issue of traumatic
brain injury.
3:01:34 PM
Mr. Jessee continued with the Projected Bring the Kids Home
(BTKH), page 10 and Results for Beneficiaries, page 11. In
2006 there were 429 kids in out-of-state psychiatric
hospitals at costs of over $40 million. As of December 2008,
there was a 59.2% drop to 175. He referred to page 10
showing the reinvestment of money spent outside into instate
programs. The four left columns from FY05 to FY08 were
actuals but the numbers in FY09 to FY13 are projections. He
commented that the strategy of pulling together with
agencies, communities, and the support of legislature could
provide phenomenal results. He proposed the year's
projection was to work in the education area.
3:03:37 PM
Mr. Jessee showed Ahead in FY 2010, page 12, the budget
recommendations for FY10. He commented that in the course of
conversations with OMB about the governor's budget, he
reported the $3 million decrement in Medicaid. He believed
if the trust was charged for the increments, they should be
credited for the decrements; this was considered good public
policy. Co-Chair Hawker believed that progress was being
made without a net increase in general fund budget.
3:04:46 PM
Representative Gara asked where the $8 million decrement
occurred. Mr. Jessee replied the $8 million represented the
out-of-state Medicaid costs.
3:04:59 PM
Mr. Jessee moved to Affordable, Appropriate Housing, page
13, and mentioned that on any given night 3500 Alaskans are
homeless, more than twice the federal number. He referred to
the Alaska Scorecard, line 19, which showed 85 percent of
minimum wage income was needed for average two-bedroom
housing as opposed to the national statistics of 30 to 35
percent. A solution to the problem was shown on the Bridge
Home Pilot Project, page 14 and with the Bridge Home Results
on page 15. The provided housing comes with engaged case
management to help people think through where they are going
in their life.
3:08:39 PM
Co-Chair Hawker reported that last year the legislature was
looking at $150 million program for the housing trust, but
there are concerns about embarking on what could appear to
the public as government subsidized housing. He believed
incorporated into the housing should be a timeframe where
the goal was to motivate people to self sufficiency and out
of public housing.
3:10:18 PM
Mr. Jessee agreed that was a good point to set time limits
although he reminded the committee that there will always be
individuals in need of some ongoing support. The goal is for
trust beneficiaries to complete the programs and move into
the community. He referred again to the Alaska Scorecard,
line 21, illustrating the percent of SSI recipients who are
working. He stressed that even after obtaining employment
the reality is most will not get beyond minimum wage jobs
and will not make enough to afford housing in the community.
3:11:38 PM
Representative Kelly disclosed his concerns about public
housing. He believed not enough was being done for the
mentally ill because the state was trying to do too much for
everyone else. He elaborated that nationally the public
housing record has not been successful.
3:13:52 PM
Mr. Jessee agreed many national public housing programs have
failed but there are success stories especially when public
housing has been integrated into mixed income communities.
Mr. Jessee showed on the Bridge Home Results, page 15, that
if money isn't appropriated for housing, the requests for
money will just appear in other budgets, such as
corrections.
3:15:38 PM
Representative Kelly agreed that employment solves so many
issues within communities. He did not understand communities
that do not support resource development.
3:17:13 PM
Mr. Jessee believed people want to work and the goal of the
trust is to get them employment but most of these jobs are
at lower wages so the issue of affordable housing still
exists.
3:18:30 PM
Representative Salmon referred to Trust Funding FY 2010,
page 5 and asked if the total budget was $21 million. He
asked what other federal grants are received by the trust.
Mr. Jessee responded that the trust does not receive any
other federal grants. The only funding source received in
the last year was $1 million from Rasmussen Foundation.
3:19:38 PM
Mr. Jessee continued to Disability Justice, page 19
indicating a commissioned study found that 42 percent of
those incarcerated in correction facilities are trust
beneficiaries. He elaborated that when looking at those
incarcerated for alcohol related or mental health issues,
the number rose to 90 percent. Mr. Jessee noted that the
trust is working with the administration and legislative
finance to construct a better trust budget. At present only
the actual treatment costs are included in the Department of
Corrections but he believed this understated the role
corrections plays in the mental health program. Mr. Jessee
explained that the criminal justice working group is looking
at investing in a portfolio of recidivism-reducing
strategies in order to drive down the curve of constructing
and paying for the operation of more prisons.
Representative Joule requested the percentage of Alaska
Natives in the 42 percent figure. Mr. Jessee responded it
was a little over 40 percent.
3:22:26 PM
Representative Gara remarked that he is aware that the trust
wants to move people into productive areas, off public
funding, and out of jail. He pointed out that the mental
health and substance abuse courts provide incentives for
those who stay in the programs or on the job and out of the
court systems. He wondered if there was a blueprint to
maximize the effectiveness of this policy.
Mr. Jessee referred to Improving Outcomes for Trust
Beneficiaries Involved with the Criminal Justice System,
page 22 and Ahead in FY 2010, page 23, line 4. This showed
the $500,000 for Treatment Funding for Therapeutic Court
participants. He expressed his disappointment for the
$500,000 increment in this focus area because, although
there has been an excellent evaluation of the effectiveness
of these courts, the courts must purchase the treatment
services directly.
3:25:20 PM
Mr. Jessee moved to Workforce Development, page 24 that
showed a shortage of qualified health care workers in
Alaska. He emphasized that the key focus areas were
recruitment, retention and training. He reported in Ahead
in FY 2010, page 26, that the trust was looking to support
student loan repayment strategies for health professions,
support increments for University of Alaska health programs,
researching a psychiatric residency program in Alaska and
finalizing plans for a PhD psychologist internship program.
The trust was not asking for any money in the Trust
Beneficiary Projects Initiative, page 27 but it was probably
a wave of the future. The trust has invested over $1 million
for beneficiaries to develop their own programs and support
networks to reduce dependency on government programs.
3:28:23 PM
Co-Chair Hawker looked forward to continuing to define
mutual responsibilities and relationships. Representative
Kelly asked if there was any system of internship within the
private sector. Mr. Jessee affirmed there were a number of
such programs but the capacity problem still exists in
making it available to all who want to participate.
Representative Kelly remarked that it would be interesting
to canvas businesses and see if they had ever been
approached about hiring trust beneficiaries. Mr. Jessee
recounted that in the past employment consisted of sheltered
workshops without a future but he believed the way forward
was through supportive employment in real jobs with the
assistance of job coaches. Representative Kelly believed
businesses need more information on the possibility of
hiring trust beneficiaries.
ADJOURNMENT
The meeting was adjourned at 3:32 PM
| Document Name | Date/Time | Subjects |
|---|---|---|
| Mental Health Trust Power Point.pdf |
HFIN 1/27/2009 1:30:00 PM |
|
| LFD overview.pdf |
HFIN 1/27/2009 1:30:00 PM |
|
| scorecard.pdf |
HFIN 1/27/2009 1:30:00 PM |