Legislature(1999 - 2000)

02/17/2000 01:40 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HOUSE FINANCE COMMITTEE                                                                                                         
February 17, 2000                                                                                                               
1:40 P.M.                                                                                                                       
                                                                                                                                
TAPE HFC 00 - 36, Side 1                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair Mulder called the House Finance Committee meeting                                                                      
to order at 1:40 p.m.                                                                                                           
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
Co-Chair Mulder    Representative Foster                                                                                        
Vice Chair Bunde   Representative Grussendorf                                                                                   
Representative Austerman   Representative Moses                                                                                 
Representative J. Davies   Representative Phillips                                                                              
Representative G. Davis   Representative Williams                                                                               
                                                                                                                                
Co-Chair Therriault was absent from the meeting.                                                                                
                                                                                                                                
ALSO PRESENT                                                                                                                    
                                                                                                                                
Annalee McConnell, Director, Office of Management and                                                                           
Budget, Office of the Governor; Joan Brown, Fiscal Analyst,                                                                     
Office of Management and Budget.                                                                                                
                                                                                                                                
SUMMARY                                                                                                                         
                                                                                                                                
HB 343 "An Act making and amending capital, supplemental,                                                                       
and other appropriations and reappropriations;                                                                                  
making a reappropriation under art. IX, sec. 17c,                                                                               
Constitution of the State of Alaska, from the                                                                                   
constitutional budget reserve fund; making                                                                                      
appropriations to capitalize funds; ratifying                                                                                   
certain expenditures; and providing for an                                                                                      
effective date."                                                                                                                
                                                                                                                                
 HB 343 was heard and HELD in Committee for further                                                                             
consideration.                                                                                                                  
HOUSE BILL NO. 343                                                                                                              
                                                                                                                                
"An Act making and amending capital, supplemental, and                                                                          
other appropriations and reappropriations; making a                                                                             
reappropriation under art. IX, sec. 17c, Constitution                                                                           
of the State of Alaska, from the constitutional budget                                                                          
reserve fund; making appropriations to capitalize                                                                               
funds; ratifying certain expenditures; and providing                                                                            
for an effective date."                                                                                                         
                                                                                                                                
Co-Chair Mulder provided members with a spreadsheet analysis                                                                    
of HB 343 from the Office of Management and Budget, dated                                                                       
2/7/00 (copy on file).                                                                                                          
                                                                                                                                
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND                                                                           
BUDGET, OFFICE OF THE GOVERNOR reviewed the Governor's                                                                          
supplemental request. When the Governor took office there                                                                       
was over $100 million dollars in "pared-down" supplemental                                                                      
items pending. The Governor made it one of his top                                                                              
priorities to reform the overall supplemental budget                                                                            
process. The Governor concluded that the situation of under-                                                                    
funding budgets that would obviously require supplemental                                                                       
appropriation was unsatisfactory. Most formula programs have                                                                    
been funded at a level consistent with projections in the                                                                       
FY00 budget. Funding for disasters and fire suppression was                                                                     
retained in the supplemental budget. Expenses for fire                                                                          
suppression and disasters exceeded the amount included in                                                                       
the FY 00 budget plan. The average amounted needed for fire                                                                     
suppression over the past five years has been $11.7 million                                                                     
dollars.                                                                                                                        
                                                                                                                                
Ms. McConnell noted that $21 million dollars are needed in                                                                      
the FY 00 budget to cover thirteen entitlement programs that                                                                    
were insufficiently funded, including pupil transportation.                                                                     
Pupil transportation was $2.1 million dollars short.                                                                            
Estimates for pupil transportation costs are based on a 3.5                                                                     
percent growth factor. This was exceeded in three school                                                                        
districts: Fairbanks, Anchorage and Kenai. She observed that                                                                    
there is limited competition in those areas. There is no                                                                        
cost control element on a straight reimbursement basis.                                                                         
                                                                                                                                
Ms. McConnell observed that there were savings in some areas                                                                    
of the FY 00 budget. She noted that K-12 enrollment was                                                                         
below the anticipated level. Authorization for education                                                                        
foundation formula funding was $12.4 million dollars over                                                                       
the FY 00 required amount due to decreases in enrollment and                                                                    
a $7.9 million dollar increase in federal aid. This will                                                                        
offset other areas in the supplemental including student                                                                        
transportation.                                                                                                                 
                                                                                                                                
Ms. McConnell referred to other areas were savings offset                                                                       
supplemental costs. The total supplemental amount will be                                                                       
within the budgeted amount, with the exception of disaster                                                                      
expenses for the on-going Central Gulf disaster. Savings in                                                                     
the Temporary Assistance to Needy Families (TANF) block                                                                         
grant can be used to fund $1.5 million dollars in daycare                                                                       
assistance grants, to meet the commitments to people coming                                                                     
off of welfare. Approximately $3.1 million dollars earmarked                                                                    
for Y2K funding was not needed and will be used to offset                                                                       
the $4.5 million dollar shortfall in the longevity bonus                                                                        
program. Federal funds were used to supplant state funds in                                                                     
front line social workers and subsidized adoption.                                                                              
                                                                                                                                
Ms. McConnell referred to power cost equalization (PCE). The                                                                    
funding package for PCE was a combination of the funds                                                                          
remaining in the PCE Fund ($2.2 million dollars), 60 percent                                                                    
of the four-dam pool revenues ($5.5 million dollars),                                                                           
interest earnings ($200 thousand dollars), and the National                                                                     
Petroleum Reserve-Alaska (NPRA) grant ($7.8 million                                                                             
dollars). The Administration has recommended that the one                                                                       
time additional dividend from Alaska Industrial Development                                                                     
and Export Authority (AIDEA) be applied to the PCE Fund.                                                                        
That way it can be used if it is needed this year or in the                                                                     
next year.                                                                                                                      
                                                                                                                                
Representative Williams asked for more information regarding                                                                    
PCE funding.                                                                                                                    
                                                                                                                                
Ms. McConnell explained that 60 percent of four-dam pool                                                                        
revenues is approximately $5.5 million dollars. This funding                                                                    
has previously gone to self-help projects, which have been                                                                      
completed.                                                                                                                      
                                                                                                                                
Ms. McConnell provided members with a spreadsheet of                                                                            
estimated costs for the on-going, Central Gulf storm                                                                            
disasters (copy on file). Funding for the disasters was                                                                         
included in section 1, without an identified amount. She                                                                        
noted that as of 2/11/00, $16.3 million dollars in costs                                                                        
have been identified. This includes the cost of clearing                                                                        
avalanches by the Department of Transportation and Public                                                                       
Facilities and the Alaska Railroad Corporation (ARRC). This                                                                     
also includes expenses associated with the restoration of                                                                       
power and telephone service. Expenses were divided into                                                                         
three categories: public assistance (infrastructure costs),                                                                     
individual assistance costs and business losses. Public                                                                         
assistance is a category used by the Federal Emergency                                                                          
Management Agency (FEMA) and totals $13 million dollars.                                                                        
Each category was divided into reported and verified                                                                            
expenses. Verified expenses have been verified by teams                                                                         
working with FEMA as being eligible for FEMA disaster funds.                                                                    
Only $7.9 million dollars have been verified to date, but                                                                       
they expect additional verifications by the FEMA teams. The                                                                     
majority of the individual costs were in Cordova. These                                                                         
expenses include temporary housing for people who were                                                                          
evacuated and have not been allowed to return to their homes                                                                    
due to avalanche danger. Business loss was minimal.                                                                             
                                                                                                                                
She observed that verified costs of $9.8 million dollars                                                                        
were transmitted to the President. This amount will be                                                                          
updated as more costs are verified by FEMA.                                                                                     
                                                                                                                                
Representative J. Davies questioned why items included in                                                                       
the verified column were not also included in the reported                                                                      
column. Ms. McConnell replied that they should have been                                                                        
reported in both.                                                                                                               
                                                                                                                                
Representative G. Davis observed that a lot of individuals                                                                      
were stranded in Girdwood. He questioned if their expenses                                                                      
will be reimbursable. Ms. McConnell did not know. Programs                                                                      
were intended to cover actual loss of homes or business as                                                                      
opposed to lost income. There were some people that chose to                                                                    
go to hotels when other free housing choices were available.                                                                    
                                                                                                                                
Ms. McConnell noted that the President has declared a FEMA                                                                      
disaster and the state of Alaska will be eligible for                                                                           
reimbursement.                                                                                                                  
                                                                                                                                
Representative J. Davies asked if there has been discussion                                                                     
regarding a fast track supplemental. Ms. McConnell noted                                                                        
that past fast track supplementals have not been considered.                                                                    
Disaster funding could be separated. She emphasized that it                                                                     
would be better to move the entire supplemental request as                                                                      
fast as possible. She observed that the administration has                                                                      
tried to separate items that could be part of the next                                                                          
year's budget. Items included are strictly for the current                                                                      
fiscal year. Representative J. Davies had the impression                                                                        
that there are some items that need to be done soon. He                                                                         
suggested that there be some separation.                                                                                        
                                                                                                                                
Ms. McConnell noted that there have been inquiries regarding                                                                    
Power Cost Equalization (PCE) and childcare assistance. She                                                                     
observed that NPRA grant funding would not be available                                                                         
until April. If the Administration does not receive                                                                             
clarification on the supplemental request, individuals that                                                                     
are currently receiving childcare assistance will have to be                                                                    
cut off. She noted that there are sizable wait lists for                                                                        
childcare assistance. The Administration is proposing to                                                                        
fund childcare assistance through excess in the TANF block                                                                      
grant. She observed that the increase in childcare                                                                              
assistance is tied to the decrease in welfare; there is                                                                         
excess in the TANF block grant because the caseload is being                                                                    
reduced.                                                                                                                        
                                                                                                                                
Representative Foster referred to section 9d, pupil                                                                             
transportation. Ms. McConnell explained that school district                                                                    
estimates are based on a annual 3.5 increase in cost. The                                                                       
cost of pupil transportation increased by more than 3.5                                                                         
percent in Anchorage has been higher. Fairbanks was $2.6                                                                        
million dollars over and Kenai was $750 thousand dollars                                                                        
over the estimated amount. Other school districts have come                                                                     
in slightly over or under.                                                                                                      
                                                                                                                                
Representative Foster noted that student enrollment was down                                                                    
and asked the difference in student enrollment. Ms.                                                                             
McConnell observed that the overall change in pupil count                                                                       
was 3,100 under the projected amount. Changes in state                                                                          
policy regarding correspondence school counts affected the                                                                      
estimate. She emphasized that school districts were caught                                                                      
by surprise.                                                                                                                    
                                                                                                                                
Representative Austerman asked if it is possible to get                                                                         
information on pupil transportation contracts for Kenai,                                                                        
Anchorage and Fairbanks. She explained that there is not as                                                                     
much cost control in areas without competition. The contract                                                                    
amount is reimbursed.                                                                                                           
                                                                                                                                
Representative Austerman expressed concern that contracts                                                                       
were negotiated for a higher amount than was budgeted.                                                                          
                                                                                                                                
Ms. McConnell clarified that a 3.5 percent growth rate was                                                                      
used for projection purposes. State statutes provide that                                                                       
the reimbursement will be for the actual contract amount.                                                                       
Contracts exceeded the estimated amount. Representative                                                                         
Austerman questioned if "may" or "shall" is used in the                                                                         
statutes. He pointed out that school districts have been                                                                        
aware of the state's budget difficulties.                                                                                       
                                                                                                                                
Representative G. Davis observed that a reduction in                                                                            
students equated to an increase in pupil transportation.                                                                        
                                                                                                                                
Representative J. Davies noted that the contracts were                                                                          
negotiated before student population was determined. He                                                                         
emphasized that contractors make commitments to schedules                                                                       
and that it takes time to respond to a change in student                                                                        
numbers.                                                                                                                        
                                                                                                                                
Ms. McConnell clarified that school districts normally                                                                          
negotiate for their contracts. She pointed out that there is                                                                    
no cost control mechanism built into the state's process.                                                                       
                                                                                                                                
Representative Williams questioned if there was a                                                                               
supplemental for pupil transportation in FY 99. Ms.                                                                             
McConnell stated that there was not a problem in FY 99. Vice                                                                    
Chair Bunde clarified that labor contracts were renegotiated                                                                    
in FY 00.                                                                                                                       
                                                                                                                                
Representative Grussendorf emphasized that private carriers                                                                     
provide the service. He pointed out that fuel costs have                                                                        
escalated.                                                                                                                      
                                                                                                                                
Representative Phillips stressed the importance of a                                                                            
standard for cost control and questioned if there is a cost                                                                     
variance in different areas of the state. Vice Chair Bunde                                                                      
observed that Anchorage maintains its own fleet of buses and                                                                    
drivers to control costs.                                                                                                       
                                                                                                                                
Representative J. Davies pointed out that new schools in                                                                        
Fairbanks resulted in an increase in the number of routes.                                                                      
There are some students that must travel by bus for an hour                                                                     
and a half each way. He maintained that the Fairbanks School                                                                    
Board is conservative and drives a hard bargain.                                                                                
                                                                                                                                
Representative Grussendorf noted that there was a jump in                                                                       
pupil transportation in FY 98.                                                                                                  
                                                                                                                                
Representative G. Davis referred to section 4h, satellite                                                                       
infrastructure. There was a $100 thousand dollar fund shift                                                                     
from interagency receipts to general funds. Ms. McConnell                                                                       
explained that interagency receipt authority was included                                                                       
with the assumption that funding would come from the                                                                            
university. The university did not receive the funding. This                                                                    
portion was not related to university needs.                                                                                    
                                                                                                                                
Representative Williams referred to section 9c, foundation                                                                      
formula. Ms. McConnell clarified that $11.811.2 million                                                                         
dollars of the amount authorized for education foundation                                                                       
formula funding was not required. She reiterated that some                                                                      
areas needed more funds than were authorized. This area                                                                         
needed less and can help cover cost of the supplemental.                                                                        
This is the only area were there was a reduction from the                                                                       
authorized amount to what was actually needed.                                                                                  
                                                                                                                                
In response to a question by Representative Austerman, Ms.                                                                      
McConnell reiterated that the state would receive FEMA                                                                          
reimbursement for the disaster. The federal government will                                                                     
pick up the larger percentage of what is fundable.                                                                              
                                                                                                                                
Representative Austerman referred to NPRA funding. He did                                                                       
not think it was likely that the state would receive                                                                            
additional NPRA funding. Ms. McConnell observed that the                                                                        
application for NPRA funding total $71 million dollars.                                                                         
Approximately $40 million dollars are available. She                                                                            
emphasized that the process is not finished. She observed                                                                       
that funding for PCE would be needed in the next fiscal                                                                         
year.                                                                                                                           
                                                                                                                                
Representative Austerman questioned if the Governor                                                                             
anticipated offering a long-term financial plan for PCE. Ms.                                                                    
McConnell noted that discussions regarding the future of PCE                                                                    
are still occurring. She acknowledged the need for a long-                                                                      
term solution.                                                                                                                  
                                                                                                                                
Representative Austerman observed that there was no firm                                                                        
offer in FY 00 for purchase of the four-dam pool. He                                                                            
expressed support for a PCE endowment. Ms. McConnell                                                                            
stressed that the Administration is looking at all                                                                              
possibilities.                                                                                                                  
                                                                                                                                
HB 343 was heard and HELD in Committee for further                                                                              
consideration.                                                                                                                  
ADJOURNMENT                                                                                                                     
                                                                                                                                
The meeting adjourned at 2:29 p.m.                                                                                              
House Finance Committee 6 2/17/00                                                                                               

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