Legislature(2013 - 2014)HOUSE FINANCE 519

02/14/2013 01:30 PM FINANCE


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01:33:27 PM Start
01:34:16 PM Discussion of the Governor's Fy 2014 Budget Amendments
02:25:27 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Governor's FY14 Budget Amendments by TELECONFERENCED
Karen Rehfeld, Director, Office of Management &
Budget
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 65 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+= HB 91 SUPPLEMENTAL/CAPITAL/OTHER APPROPRIATIONS TELECONFERENCED
Heard & Held
+= HB 66 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 14, 2013                                                                                          
                         1:33 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:33:27 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Austerman called the House Finance Committee                                                                           
meeting to order at 1:33 p.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Alan Austerman, Co-Chair                                                                                         
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lindsey Holmes                                                                                                   
Representative Scott Kawasaki, Alternate                                                                                        
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative David Guttenberg                                                                                                 
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Karen Rehfeld,  Director, Office  of Management  and Budget,                                                                    
Office   of    the   Governor;   Laura    Achee,   Director,                                                                    
Communications  and  Administration, Alaska  Permanent  Fund                                                                    
Corporation.                                                                                                                    
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 65     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
                                                                                                                                
          HB 65 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 66     APPROP: MENTAL HEALTH BUDGET                                                                                          
                                                                                                                                
          HB 66 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 91     SUPPLEMENTAL/CAPITAL/OTHER APPROPRIATIONS                                                                             
                                                                                                                                
          HB 91 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
DISCUSSION OF THE GOVERNOR'S FY 2014 BUDGET AMENDMENTS                                                                          
                                                                                                                                
                                                                                                                                
HOUSE BILL NO. 65                                                                                                             
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs,    capitalizing   funds,   amending                                                                    
     appropriations,   and   making  reappropriations;   and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
HOUSE BILL NO. 66                                                                                                             
                                                                                                                                
     "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."                                                                                                        
                                                                                                                                
HOUSE BILL NO. 91                                                                                                             
                                                                                                                                
     "An  Act  making supplemental  appropriations,  capital                                                                    
     appropriations,  and   other  appropriations;  amending                                                                    
     appropriations;   repealing    appropriations;   making                                                                    
     appropriations to  capitalize funds; and  providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
^DISCUSSION OF THE GOVERNOR'S FY 2014 BUDGET AMENDMENTS                                                                         
                                                                                                                                
1:34:16 PM                                                                                                                    
                                                                                                                                
KAREN REHFELD,  DIRECTOR, OFFICE  OF MANAGEMENT  AND BUDGET,                                                                    
OFFICE OF  THE GOVERNOR,  introduced herself for  the record                                                                    
and related that  the Office of Management  and Budget (OMB)                                                                    
produced a  fiscal summary of  the budget 3 times  per year.                                                                    
She explained  that a summary  was produced when  the budget                                                                    
was  released  in  December, which  was  updated  after  the                                                                    
amendments on the  30th day and stated that  a final summary                                                                    
would  be released  after the  budget had  been enacted  and                                                                    
signed by  the governor.  She addressed the  document titled                                                                    
"Governor's  Amended  Fiscal  Summary" (copy  on  file)  and                                                                    
relayed that  there had been  some changes on  the left-hand                                                                    
side of the summary related  to the FY13 budget; the changes                                                                    
included  the  supplementals  that  the  administration  had                                                                    
requested and several adjustments.                                                                                              
                                                                                                                                
Ms. Rehfeld  spoke to line  3 of  the fiscal summary  and to                                                                    
the  revenue  adjustment of  $48.9  million,  which was  the                                                                    
prior  year's  recovery  for  the  Carlson  case  [State  of                                                                    
Alaska, Commercial  Fisheries Entry Commission  v. Carlson].                                                                    
She  explained that  the state  had been  able to  recover a                                                                    
significant amount  of the settlement  from the  case, which                                                                    
would  show   on  the  spring  revenue   forecast  when  the                                                                    
Department  of   Revenue  (DOR)  conducted   its  projection                                                                    
updates. She  pointed out that  the revenue  adjustment from                                                                    
the settlement  recovery was important to  note when looking                                                                    
at the  bottom line regarding  the current fiscal  year. She                                                                    
stated  that  line 10  under  agency  operations showed  the                                                                    
original budget  request from December  of 2014  and related                                                                    
that  line 11  depicted the  items that  were included  in a                                                                    
January   supplemental  bill;   line   12  highlighted   the                                                                    
amendments that  had been  added that  day. She  stated that                                                                    
you could see the changes that  were made in each section of                                                                    
the fiscal  summary. She pointed  to line 37 of  the summary                                                                    
and related that it showed  an adjustment to the $40 million                                                                    
place holder for the supplemental  requests in FY13 and FY14                                                                    
that had been in OMB's  December fiscal summary; because the                                                                    
supplemental had been so low,  the place holder for FY13 had                                                                    
been removed  and had been  adjusted down to $20  million in                                                                    
FY14.  She related  that OMB  had put  forward a  very small                                                                    
package of  amendments and was  keeping the pressure  on the                                                                    
operating budget.  She added  that OMB  wanted to  keep this                                                                    
budget as tight as it could.                                                                                                    
                                                                                                                                
1:38:45 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld discussed  line 68  of the  fiscal summary  and                                                                    
related that  it depicted what  the projected draw  from the                                                                    
Statutory Budget  Reserves would be if  the current spending                                                                    
plan was  completed; it  showed a  $322.9 million  draw from                                                                    
the reserve,  which was down from  OMB's December projection                                                                    
of $410.8  million. She observed  that some big  reasons for                                                                    
the drop  in the  projected draw  were the  low supplemental                                                                    
request  and  the prior  year's  recovery  from the  Carlson                                                                    
case.  She observed  that because  the comparison  point had                                                                    
changed,  the overall  budget still  depicted a  1.2 percent                                                                    
increase in  operating costs; however, OMB's  budget request                                                                    
had been reduced  by about $19.1 million as a  result of the                                                                    
amendments. She  offered that the operating  budget was very                                                                    
lean and  that OMB  had conducted  a rigorous  review before                                                                    
the budget had been presented to the committee.                                                                                 
                                                                                                                                
Representative Gara thought he  heard Ms. Rehfeld state that                                                                    
there was a $1.2 billion  reduction in the operating budget,                                                                    
but surmised that she had  meant a $1.2 billion reduction in                                                                    
the  total   operating  and   capital  costs.   Ms.  Rehfeld                                                                    
responded  that what  she had  meant to  say was  that OMB's                                                                    
submitted amendments  had reduced  its overall  General Fund                                                                    
budget  in  FY14  by  $19.1 million  in  comparison  to  the                                                                    
December  budget; however,  if you  compared the  governor's                                                                    
amended request  to the  FY13 revised numbers  on line  7 of                                                                    
fiscal summary, it showed a 1.2 percent increase.                                                                               
                                                                                                                                
Ms.  Rehfeld discussed  the 1  page  summary titled  "FY2013                                                                    
Supplemental  Summary" (copy  on file)  and related  that it                                                                    
showed  what  the  original   supplemental  request  was  on                                                                    
January 28; the total supplemental  at that time was $24.456                                                                    
million. She  shared that the  amendments OMB  was currently                                                                    
requesting  totaled  $1.3651  million   with  a  $1  million                                                                    
federal  capital  request  and represented  an  increase  of                                                                    
$2.3651 million.                                                                                                                
                                                                                                                                
Representative Munoz requested that  someone point out which                                                                    
document Ms. Rehfeld was addressing.                                                                                            
                                                                                                                                
Ms. Rehfeld noted  that the documents should  be in member's                                                                    
packets.                                                                                                                        
                                                                                                                                
1:43:57 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld  continued to speak to  the supplemental summary                                                                    
spread  sheet. She  related that  if  the supplemental  bill                                                                    
passed, it  would total $26.8211 million,  of which $972,500                                                                    
would be General Funds.                                                                                                         
                                                                                                                                
Ms.  Rehfeld walked  through the  items on  the supplemental                                                                    
spreadsheet    titled   "FY2013    Supplemental   Amendments                                                                    
Submitted February 12, 2013."                                                                                                   
                                                                                                                                
Ms. Rehfeld requested a brief AT EASE.                                                                                          
                                                                                                                                
1:45:27 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:47:25 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
1:47:30 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld  thanked the  committee  for  its patience  and                                                                    
addressed page 1 of  supplemental spreadsheet titled "FY2013                                                                    
Supplemental  Amendments Submitted  February 12,  2013." She                                                                    
spoke  to the  first  item on  line 1,  which  was the  FY13                                                                    
Alaska correctional  officers salary and  benefits increase.                                                                    
She explained  that a bargaining agreement  had been reached                                                                    
with  the  Alaska  correctional officers  and  that  line  1                                                                    
reflected  the  costs  in  the   current  fiscal  year.  She                                                                    
explained that  the increase  would go  towards a  2 percent                                                                    
cost  of living  adjustment  (COLA),  health insurance,  and                                                                    
geographic differential. She pointed  out that line 1's item                                                                    
totaled $1.2589 million; $1.244  million of this amount were                                                                    
General Fund dollars. She added  that there would also be an                                                                    
amendment in the FY14 budget  for 920 correctional officers.                                                                    
She  addressed  the second  item  on  line  2, which  was  a                                                                    
formula component under the Department  of Health and Social                                                                    
Services   (DHSS);  the   item  was   the  for   Title  IV-E                                                                    
participation rate  under the federal  child-welfare policy.                                                                    
She explained  that there were  mandated changes to  how the                                                                    
Title  IV-E foster-care  participation  rate was  calculated                                                                    
and that the  federal funds for the program  were going down                                                                    
by $2.5 million; OMB was  requesting $2.5 million of general                                                                    
fund  dollars  to replace  the  missing  federal funds.  She                                                                    
added that OMB  was also requesting the $2.5  million in the                                                                    
amended budget for FY14.                                                                                                        
                                                                                                                                
Ms.   Rehfeld   continued   to  discuss   the   supplemental                                                                    
spreadsheet and spoke  to the item on line 3,  which was for                                                                    
the  Office of  the  Governor; it  regarded a  redistricting                                                                    
decision that came out after  OMB had presented its December                                                                    
budget.  She  explained  that OMB  was  requesting  a  carry                                                                    
forward under  the redistricting  board for $250,000  in the                                                                    
current year  into FY14;  there would also  be a  request in                                                                    
the FY14  budget for the  redistricting board work  that was                                                                    
needed to  comply with a court  order. She spoke to  an item                                                                    
for the Division of Elections  on line 4; OMB was requesting                                                                    
carry forward of  $500,000 for work that  the division would                                                                    
need to  conduct under the  redistricting. She  directed the                                                                    
committee's  attention   to  line  5,  which   reflected  an                                                                    
additional  settlement  under  the  Department  of  Law  for                                                                    
$106,200;  this settlement  was  associated  with a  school-                                                                    
cleanup  sight  in  the Kuspuk  School  District  for  Aniak                                                                    
vocational schools.  She explained  that the  settlement had                                                                    
come  in after  OMB had  presented the  supplemental to  the                                                                    
legislature several weeks prior.                                                                                                
                                                                                                                                
Ms.   Rehfeld  discussed   page   2   of  the   supplemental                                                                    
spreadsheet and  pointed to the new  capital item associated                                                                    
with $1 million in  federal receipt authority. She explained                                                                    
that the Government of Japan  had provided $5 million to the                                                                    
United  States for  the cleanup  of the  tsunami debris  and                                                                    
that the Department of  Environmental Conservation (DEC) was                                                                    
the lead  state agency on  the cleanup effort; DEC  would be                                                                    
entering  into  a  memorandum   of  understanding  with  the                                                                    
National  Oceanic  and  Atmospheric Administration  for  the                                                                    
work  regarding the  effort. She  related that  OMB did  not                                                                    
know  how much  funding  for the  cleanup  efforts would  be                                                                    
allocated to Alaska, but was  estimating that it would be $1                                                                    
million;  OMB   was  requesting   the  authorization   in  a                                                                    
supplemental  because the  funds would  be available  in the                                                                    
coming spring.                                                                                                                  
                                                                                                                                
1:51:33 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld  spoke  to  the   3  re-appropriations  on  the                                                                    
supplemental spreadsheet  that OMB was requesting  under the                                                                    
Department  of  Transportation  and Public  Facilities.  She                                                                    
stated  that  lines were  8  and  9  were both  for  Federal                                                                    
Aviation Administration authorizations.  The request on line                                                                    
8 was  for $15 million  for work  on the Ambler  airport and                                                                    
the request  on line 9 was  for $5 million for  the Kotzebue                                                                    
airport runway-safety improvements;  the reappropriation was                                                                    
federal  receipt  authority   from  prior  National  Highway                                                                    
System   pavement  and   bridge  appropriations   that  were                                                                    
available  to   be  reallocated   to  these   projects.  She                                                                    
discussed  the   final  item   on  page   3,  which   was  a                                                                    
reappropriation  of   $40  million  for  the   Dowling  Road                                                                    
extension  in  Anchorage;  the  source  of  funds  for  this                                                                    
project   was  also   from  previously   authorized  federal                                                                    
receipts  for  the  National  Highway  System  pavement  and                                                                    
bridge refurbishment program.                                                                                                   
                                                                                                                                
Representative    Gara    expressed   confusion    regarding                                                                    
differences  between the  Governor's Amended  Fiscal Summary                                                                    
and supplemental  spreadsheet. He explained that  the fiscal                                                                    
summary showed  a total supplemental request  of $972,000 in                                                                    
General  Funds, while  page 3  of the  spreadsheet showed  a                                                                    
supplemental of  $3.8 million in General  Funds. Ms. Rehfeld                                                                    
directed  the  committee's  attention  to  the  supplemental                                                                    
summary. She  stated that  the General  Fund was  reduced by                                                                    
$2.8777 million  on the  original supplemental  request from                                                                    
January  28;  however,  the  amendments  that  OMB  had  put                                                                    
forward  for  consideration  resulted   in  a  General  Fund                                                                    
increase of $3.8502 million. She  expounded that the overall                                                                    
supplemental  General Fund  would be  $972,500; the  summary                                                                    
showed the  original bill  amounts and  what the  total bill                                                                    
would be with the amendments.                                                                                                   
                                                                                                                                
Representative   Gara  inquired   if  OMB   had  added   the                                                                    
supplemental,   which   had   subtracted   money,   to   the                                                                    
amendments, which added funds.  Ms. Rehfeld responded in the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
1:54:19 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld  addressed the document titled  "FY2014 Governor                                                                    
Amended  Summary." She  related that  the agency  operations                                                                    
non-formula requests were negative  $3.001 million, but were                                                                    
a positive General  Fund of $3.7838 million.  She pointed to                                                                    
the 3 formula items, which  were comprised of $5.720 million                                                                    
in  General Funds  and had  a total  of $4.450  million. She                                                                    
stated  that the  correctional officers  agreement that  had                                                                    
been previously  discussed would  be for  FY14; it  would be                                                                    
$5.6056 million in General Funds  and would have total funds                                                                    
of $5.671 million. She noted  a reduction in debt service of                                                                    
$17.3 million,  as well  as a  debt service  associated with                                                                    
fund  transfers.  She  stated   that  although  the  capital                                                                    
amendments  would not  be reviewed  in the  current meeting,                                                                    
they were reflected on the summary sheet.                                                                                       
                                                                                                                                
Ms.  Rehfeld directed  the committee's  attention  to the  8                                                                    
page summary  titled "FY2014 Operating  Amendments Submitted                                                                    
February 12,  2013." She  spoke to line  1, which  was under                                                                    
the  Department  of Administration  (DOA)  and  was for  the                                                                    
Mandated Patient-Centered  Outcome Research  Institute Trust                                                                    
Fund  that was  a requirement  under the  Patient Protection                                                                    
and Affordable  Care Act;  it would  be a  fee based  on the                                                                    
number of covered  individuals. She pointed out  that line 1                                                                    
was a  new request and  that OMB  had not realized  that the                                                                    
ruling  from the  Internal Revenue  Service would  be issued                                                                    
until  after  the submission  of  the  December budget;  the                                                                    
request was for $65,000 for the new requirement.                                                                                
                                                                                                                                
Co-Chair  Stoltze inquired  if  the  Patient Protection  and                                                                    
Affordable  Care Act  item represented  the "first  of many"                                                                    
such  items. Ms.  Rehfeld  replied that  she  was unable  to                                                                    
answer the question.                                                                                                            
                                                                                                                                
1:57:56 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld  continued to speak  to the  operating amendment                                                                    
summary and  discussed the item  on line 2, which  was under                                                                    
DOA;  the item  was  associated with  an increased  workload                                                                    
within the  Division of Retirement and  Benefits. She stated                                                                    
that  the number  of retirees  in Alaska  was continuing  to                                                                    
increase, but  that division's staffing and  efforts had not                                                                    
increased; on  line 2, OMB  was requesting $171,600  for the                                                                    
division  to manage  the increased  workload. She  furthered                                                                    
that  the administration  had been  making  every effort  to                                                                    
utilize more  online and technology based  support to manage                                                                    
the workload and  that it believed that  the requested funds                                                                    
would help  the division manage the  workload. She discussed                                                                    
line 3 of the summary  and indicated that OMB was requesting                                                                    
$187,500  in program  receipts under  the DOA's  Division of                                                                    
Motor  Vehicles   (DMV);  this  item  was   associated  with                                                                    
centrally issued drivers  licenses and identification cards.                                                                    
She  explained  that  the  DMV  had  been  working  hard  to                                                                    
increase security  to reduce fraud and  limit identity theft                                                                    
and relayed there had been  challenges regarding the state's                                                                    
drivers  licenses and  identification  cards; the  centrally                                                                    
issued  process would  greatly enhance  the administration's                                                                    
ability to make those documents secure.                                                                                         
                                                                                                                                
Ms. Rehfeld  continued to speak  to the  operating amendment                                                                    
summary and  indicated that the  item on line 4  corrected a                                                                    
mistake. She  explained that $155,000  in General  Funds had                                                                    
mistakenly been reduced in the  December budget, even though                                                                    
the decrement had  already taken place; OMB did  not want to                                                                    
apply  the  same  reduction  twice   to  the  Alaska  Energy                                                                    
Authority. She stated  that line 5 was  for the correctional                                                                    
officers and related that every  component that had personal                                                                    
services  contained  an  adjustment  for  the  cost  of  the                                                                    
correctional  officers  in  the Department  of  Corrections'                                                                    
budget.  She spoke  to  line 6  and related  that  it was  a                                                                    
request   for  the   Department  of   Education  and   Early                                                                    
Development's  (DEED)  Mt.  Edgecombe boarding  school;  the                                                                    
item  was  associated   with  dormitory-management  contract                                                                    
costs.  She  shared  that  there   had  been  a  significant                                                                    
increase in the dorm-management  contract from FY13 into the                                                                    
FY14 budget.  She explained that  OMB had been  working with                                                                    
DEED  to attempt  another option  to  address the  increased                                                                    
costs, but  that the  department had  been unable  to absorb                                                                    
the money  for dorm management; OMB  was requesting $305,000                                                                    
for the item on line 6.                                                                                                         
                                                                                                                                
2:01:27 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld continued  to discuss  the operating  amendment                                                                    
summary. She  stated that lines  7 and 8 for  the Department                                                                    
of Health  and Social  Services (DHSS) were  associated with                                                                    
the pioneer  homes' increases in food  service, laundry, and                                                                    
janitorial  contracts; the  requests were  also in  the FY13                                                                    
supplemental.  She addressed  the  item on  line  9 for  the                                                                    
Alaska  Psychiatric  Institute   that  was  associated  with                                                                    
$350,000 in statutory-designated  program receipts; the item                                                                    
was  based on  the hospital  daily rates  for Medicare.  She                                                                    
explained that the  item would help the  institute offset an                                                                    
increase  in  the  cost of  providing  service  to  Medicare                                                                    
patients. She  discussed the  item on line  10 for  DHSS for                                                                    
security  improvements  at  the  anchorage  regional  office                                                                    
building  and  noted  that there  was  also  a  supplemental                                                                    
request before  the committee; the item  represented funding                                                                    
for  the  continuation  work  of  security  improvements  to                                                                    
address safety issues. She spoke to  the item on line 11 for                                                                    
DHSS and  relayed that  it was  associated with  the federal                                                                    
unrestricted   authorization   that  made   the   department                                                                    
eligible  to receive  payments under  the Children's  Health                                                                    
Insurance Program;  the item would  allow the  department to                                                                    
continue to receive the funds.                                                                                                  
                                                                                                                                
Ms. Rehfeld  continued to speak  to the  operating amendment                                                                    
summary and related  that the item on line 12  was a formula                                                                    
item for  foster-care rate adjustments; this  was associated                                                                    
with a  recently completed  foster-care rate  study, through                                                                    
which  it was  determined that  OMB needed  to increase  the                                                                    
rates.  She pointed  out that  there had  also been  a court                                                                    
case  regarding  the  foster-care  rates and  that  OMB  was                                                                    
requesting $2.6 million for line  12, of which $2.11 million                                                                    
were unrestricted General Funds. She  pointed to the item on                                                                    
line  13  and shared  that  it  was  the mandated  Title  IV                                                                    
participation rate  change, which resulted in  a decrease of                                                                    
$2.5  million  in General  Funds  and  an increase  of  $2.5                                                                    
million in the governor's budget.  She discussed the item on                                                                    
line 14 and explained  that the previously mentioned foster-                                                                    
care rate  adjustment also  applied to  subsidized adoptions                                                                    
and guardianships; the same rate  study also applied to this                                                                    
component. She  stated that  line 14  showed an  increase of                                                                    
$1.85  million,  of  which $1.11  million  was  unrestricted                                                                    
General Fund.                                                                                                                   
                                                                                                                                
Ms. Rehfeld  continued to speak  to the  operating amendment                                                                    
summary  and  pointed   to  the  item  on   line  15,  which                                                                    
represented   a   proposed   structural  change;   OMB   was                                                                    
requesting the  authority to have the  work services funding                                                                    
remain in DHSS and have  that department manage the program.                                                                    
She  explained   the  in   the  past,   there  had   been  a                                                                    
reimbursable service agreement with  the Department of Labor                                                                    
and   Workforce    Development   (DLWD),   but    that   the                                                                    
administration believed that it  would be more efficient and                                                                    
result in  less overhead cost  if DHSS retained  the funding                                                                    
and did the  work. She pointed out that there  was a request                                                                    
to transfer  the positions  from DLWD to  DHSS and  that the                                                                    
inner-agency  receipt  authorization  in the  DLWD's  budget                                                                    
would be  deleted; items 15  through 20 were all  related to                                                                    
the transfer of the positions.                                                                                                  
                                                                                                                                
2:06:52 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld continued  to address  the operating  amendment                                                                    
summary and spoke to the item  on line 21, which was for the                                                                    
Department  of Public  Safety (DPS).  Line 21's  request was                                                                    
for rural-trooper  housing and  was associated  with General                                                                    
Fund program  receipts for rental income  for rural housing;                                                                    
the rates received  a COLA every year. She  pointed out that                                                                    
there  had also  been increases  in rural-housing  locations                                                                    
and  that  OMB  was   requesting  $500,000  for  the  rental                                                                    
receipts  on line  21; the  receipts would  be used  for the                                                                    
maintenance of the facilities.  She directed the committee's                                                                    
attention  to the  item on  line 22  that was  for DPS;  the                                                                    
request was  for $163,800  in General  Funds to  implement a                                                                    
radio  dispatcher   class  study  that  had   recently  been                                                                    
completed.  She   stated  that  line  22   would  affect  43                                                                    
positions,  which would  be shifted  from radio  dispatch to                                                                    
emergency services  dispatchers. She  spoke to lines  23 and                                                                    
24  and related  that both  items were  associated with  the                                                                    
Alaska  Permanent  Fund  Corporation (APFC).  She  explained                                                                    
that line  23 was requesting  $130,000 in APFC  receipts for                                                                    
the  corporation's  professional  services  and  contractual                                                                    
cost increases and  that line 24 was  requesting $198,000 in                                                                    
APFC receipts  for the compensation plan  that the Permanent                                                                    
Fund used for its employees.                                                                                                    
                                                                                                                                
Ms.  Rehfeld continued  to discuss  the operating  amendment                                                                    
summary and discussed the item  on line 25. She relayed that                                                                    
on the  fiscal summary,  OMB had  highlighted the  amount of                                                                    
permanent funds that were needed  for inflation proofing, as                                                                    
well as  for the Permanent Fund  Dividend (PFD) calculation;                                                                    
OMB updated this number based  on the monthly statement that                                                                    
it received from  APFC. She stated that line 25  showed a $4                                                                    
million  adjustment to  the OMB's  December projections  and                                                                    
that there  would be  another adjustment  in the  new fiscal                                                                    
summary on  the enacted  budget; the  amendment also  made a                                                                    
technical correction in the language  section of the budget.                                                                    
She spoke to the  item on line 26 and related  that it was a                                                                    
request  for $1.75  million  associated with  redistricting;                                                                    
this item  plus the  carry forward  that was  discussed when                                                                    
reviewing the  supplemental would  provide about  $2 million                                                                    
for the  redistricting board's  activities from  the current                                                                    
year until  2015. She  concluded that  OMB was  requesting a                                                                    
multi-year operating item on line 26.                                                                                           
                                                                                                                                
2:09:55 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld continued  to address  the operating  amendment                                                                    
summary and stated that the item  on line 27 was a reduction                                                                    
of  $17.3 million  for  debt service;  the  reduction was  a                                                                    
change  based  on DOR's  current  estimates  of the  general                                                                    
obligation  bond  debt  service   and  reflected  a  revised                                                                    
projection that would save the  state $17.3 million in debt-                                                                    
service costs.  She stated that  the item  on line 28  was a                                                                    
correction  that   she  had  mentioned  during   a  previous                                                                    
overview hearing.  She explained that the  governor had been                                                                    
clear  that  his  intention was  to  provide  an  additional                                                                    
$125,000 to  capitalize the Sustainable  Energy Transmission                                                                    
and  Supply  Development  Fund   (SETS).  She  relayed  that                                                                    
although it was reflected  on OMB's December fiscal summary,                                                                    
the actual  transaction had not  been in the bill;  the item                                                                    
on  line 28  represented  the language  that would  actually                                                                    
make  the  appropriation  from the  Alaska  Housing  Capital                                                                    
Corporation  Fund  into  the  newly  established  SETS.  She                                                                    
discussed the final item on line  29 and related that it was                                                                    
associated  with an  adjustment  to the  amount of  receipts                                                                    
under  the  1  cent  surcharge for  the  Oil  and  Hazardous                                                                    
Substance   Release  Prevention   and  Response   Fund;  the                                                                    
estimate had  been $1.9 million,  but was now  $1.1 million.                                                                    
She concluded that  line 29 showed an  $800,000 reduction in                                                                    
that fund transfer.                                                                                                             
                                                                                                                                
Representative  Wilson  inquired  how many  dormitories  Mt.                                                                    
Edgecombe  currently  had.  Ms.  Rehfeld  replied  that  she                                                                    
believed there  were 3,  but offered  to confirm  the number                                                                    
with the DEED.                                                                                                                  
                                                                                                                                
Representative Wilson pointed out  that the contract totaled                                                                    
$141,000  per  month and  inquired  if  there had  been  any                                                                    
discussion  regarding  the  costs being  high.  Ms.  Rehfeld                                                                    
replied  that  the  department would  be  better  suited  to                                                                    
answer, but  that the contract  had been  competitively bid.                                                                    
She added that  DEED had worked hard on  the contract, which                                                                    
included coverage  of the dorms  24 hours  a day 7  days per                                                                    
week. She  offered to  have the department  get back  to the                                                                    
committee with a response.                                                                                                      
                                                                                                                                
Representative  Wilson  inquired   how  many  contracts  had                                                                    
returned from  the competitive  bidding. Ms.  Rehfeld agreed                                                                    
to supply the requested information.                                                                                            
                                                                                                                                
Co-Chair  Stoltze  spoke  to  the  item on  line  3  of  the                                                                    
operating  amendment  summary,  which  dealt  with  driver's                                                                    
licenses. He  inquired if the administration  had considered                                                                    
fixing  all  the driver's  license  issues  in one  step  by                                                                    
removing the item from the  supplemental and attaching it as                                                                    
a  fiscal note  to Representative  Lynn's bill.  Ms. Rehfeld                                                                    
responded that  she was unable  to answer, but  offered that                                                                    
the department would be happy to discuss the issue.                                                                             
                                                                                                                                
Co-Chair Stoltze thought  that the item on line  3 should be                                                                    
removed  until  the  committee received  a  more  definitive                                                                    
answer.   Co-Chair   Austerman   responded   that   Co-Chair                                                                    
Stoltze's thoughts were duly noted.                                                                                             
                                                                                                                                
2:14:12 PM                                                                                                                    
                                                                                                                                
Representative Thompson  spoke to  line 24 of  the amendment                                                                    
summary.  He acknowledged  that  the  Permanent Fund  should                                                                    
have the best managers, but  noted that the APFC's employees                                                                    
were  paid more  than  normal state  employees. He  conceded                                                                    
that paying the  APFC employees more might  be prudent given                                                                    
the importance of the Permanent  Fund, but expressed concern                                                                    
that the  disparity in  pay was  causing vacancies  in other                                                                    
departments because APFC  was offering a higher  pay for the                                                                    
same  type  of  work.  Ms. Rehfeld  acknowledged  that  APFC                                                                    
employees  were exempt  and that  its board  established the                                                                    
corporation's compensation  schedule and package.  She noted                                                                    
that  that there  were also  concerns regarding  whether the                                                                    
pay for the  state treasury managers was  comparable to that                                                                    
of the managers of Permanent  Fund and observed that OMB had                                                                    
a  discussion  about  the  issue   every  time  APFC  sought                                                                    
additional funding  for its compensation plan;  however, the                                                                    
request seemed appropriate for the current situation.                                                                           
                                                                                                                                
Co-Chair Austerman  inquired if the  request on line  24 was                                                                    
for staff and not for  contracts. Ms. Rehfeld replied in the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
Representative  Gara observed  that  APFC did  not have  the                                                                    
same  incentive built  into it  to  hold down  costs as  the                                                                    
legislature and  the governor did,  which were  dealing with                                                                    
revenues. He mused that he  was unsure if the APFC employees                                                                    
were  being treated  fairly  or if  the  other exempt  state                                                                    
employees were  being treated  unfairly, but  suspected that                                                                    
there was a large gap between  the raises inside of APFC and                                                                    
the raises for exempt employees in state government.                                                                            
                                                                                                                                
Co-Chair  Stoltze   inquired  if  Representative   Gara  was                                                                    
referencing   classified   or    exempt   state   employees.                                                                    
Representative Gara  responded that  he was  referencing the                                                                    
employees who the administration raised salaries on.                                                                            
                                                                                                                                
Representative Gara  inquired who was on  the Permanent Fund                                                                    
Board  from the  administration. Ms.  Rehfeld believed  that                                                                    
there  were  two  members from  the  administration  on  the                                                                    
Permanent  Fund  Board, but  deferred  the  question to  Ms.                                                                    
Achee.  She added  that the  State of  Alaska had  a dynamic                                                                    
classification and  pay structure that  included classified,                                                                    
totally  exempt, partially  exempt  status, as  well as  the                                                                    
independent corporations; furthermore,  there were number of                                                                    
complexities involved  with each type. She  concluded that a                                                                    
lot  of the  same  concerns had  been  discussed during  the                                                                    
formulation of  the December budget,  but that  through more                                                                    
discussion  with APFC,  OMB thought  it  was appropriate  to                                                                    
bring the amendment forward.                                                                                                    
                                                                                                                                
2:18:04 PM                                                                                                                    
                                                                                                                                
LAURA  ACHEE, DIRECTOR,  COMMUNICATIONS AND  ADMINISTRATION,                                                                    
ALASKA  PERMANENT FUND  CORPORATION,  replied  that she  was                                                                    
unaware of  an influx of  staff from other  departments into                                                                    
the  APFC; moreover,  she could  site several  staff members                                                                    
who  had left  APFC to  go to  other state  departments. She                                                                    
pointed out  that when  APFC did  the market  salary surveys                                                                    
that  helped set  the pay  for its  investment officers,  it                                                                    
looked  at  other  public   sector  investment  officers  in                                                                    
similar institutional  investment funds across the  U.S. and                                                                    
did not look at private  sector investment officers; in this                                                                    
regard, APFC was  attempting to get a  very comparable scale                                                                    
regarding its pay.  She related that APFC's  HR officer took                                                                    
into great account what other  State of Alaska agencies were                                                                    
paying    regarding   such    positions   as    accountants,                                                                    
administration, and IT staff. She  believed that there was a                                                                    
perception  that APFC  staff  were  more highly  compensated                                                                    
than employees  of other state  agencies, but  asserted that                                                                    
this perception  was incorrect. She conceded  that some APFC                                                                    
staff  had come  from  other state  agencies,  but that  the                                                                    
reverse was also true.                                                                                                          
                                                                                                                                
Ms.  Achee  requested  a rephrasing  of  the  Representative                                                                    
Gara's question. Representative Gara  responded that what he                                                                    
really wanted to  know was whether the extent  of the raises                                                                    
was in the  3 percent, 10 percent, or 15  percent range. Ms.                                                                    
Achee replied that  there was a salary  management plan that                                                                    
showed anything from a 0  percent to 7 percent increase that                                                                    
was based  on merit. She  related that the 7  percent raises                                                                    
were incredibly rare  and that the raises tended  to be more                                                                    
in the  3 percent to 5  percent range. She offered  that a 3                                                                    
percent  to  5  percent  raise  was  comparable  to  a  step                                                                    
increase in other state agencies.                                                                                               
                                                                                                                                
Ms. Achee  related that APFC  had to come forward  for staff                                                                    
funding because it was a  smaller agency with only 38 staff.                                                                    
She shared  that whereas other  state agencies were  able to                                                                    
manage the  payment of their  step increases  within vacancy                                                                    
rates, APFC was  too small to do so; therefore,  APFC had to                                                                    
come forward  for funding in  its personal services  line to                                                                    
make the payments.   She recalled that in past  APFC did not                                                                    
always  receive   the  increment   for  pay   increases  and                                                                    
remembered  that the  most recent  APFC member  who went  to                                                                    
another  agency did  so on  a year  that increases  were not                                                                    
paid; the  employee had felt  there had been a  promise made                                                                    
when  they were  hired regarding  yearly increases  based on                                                                    
merit  and  they had  left  for  another state  agency.  She                                                                    
pointed out that the item  was important for APFC to recruit                                                                    
and retain the best employees it  could and that in order to                                                                    
do  so, it  needed  to  pay completive  wages  and keep  its                                                                    
promises   to  employees   that  their   efforts  would   be                                                                    
recognized.                                                                                                                     
                                                                                                                                
Representative  Thompson  inquired  the APFC  employees  who                                                                    
received merit  raises would also  receive a  step increase.                                                                    
Ms.  Achee replied  that APFC  was completely  separate from                                                                    
the State  of Alaska  and that the  merit increases  that it                                                                    
paid were  what would correspond  to a step increase  that a                                                                    
regular state employee would receive.                                                                                           
                                                                                                                                
2:22:25 PM                                                                                                                    
                                                                                                                                
Ms. Achee responded to an  earlier comment by Representative                                                                    
Gara regarding APFC not having  the same pressure to control                                                                    
costs as  other state  entities, but  believed that  was not                                                                    
true. She pointed out that  during her tenure at APFC, there                                                                    
had been  a number  of increments that  had come  before OMB                                                                    
and the legislature  that had been denied.  She relayed that                                                                    
APFC worked  hard to  control costs  within its  budget with                                                                    
the  recognition that  money that  was spent  was not  going                                                                    
towards  the PFD.  She recalled  that a  year or  two prior,                                                                    
Mike  Burns  had  had  answered   a  question  in  committee                                                                    
regarding  how APFC  approached  the costs  of managing  the                                                                    
Permanent  Fund. She  remembered that  Mr. Burns  had stated                                                                    
that  APFC would  not approach  the management  of the  fund                                                                    
from a  position of  trying to  achieve the  lowest possible                                                                    
costs because  doing so would  result in the  lowest returns                                                                    
and performance. She shared that  APFC was seeking to find a                                                                    
balance  between  what  it  was spending  and  what  it  was                                                                    
getting  in return;  APFC  was always  mindful  that it  was                                                                    
managing the people's money.                                                                                                    
                                                                                                                                
Co-Chair Stoltze  had a difficult  time believing  that APFC                                                                    
had a daily obsession with amount of the PFD.                                                                                   
                                                                                                                                
Co-Chair Austerman inquired if  the $198,000 request on line                                                                    
24 would  be used to hire  staff or whether it  was only for                                                                    
merit increases. Ms.  Achee replied that it was  tied to the                                                                    
estimated  cost  of providing  merit  increases  for the  38                                                                    
staff within  the APFC. She  added that merit  increases and                                                                    
new staff were  managed on the same line and  that there had                                                                    
been years  where APFC  had empty  positions because  it did                                                                    
not have enough in the line to pay for new staff.                                                                               
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
2:25:27 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:26 p.m.                                                                                          

Document Name Date/Time Subjects
HB 91 FY2013_Supplementals_Submitted_February_12_2013_Summary.pdf HFIN 2/14/2013 1:30:00 PM
HB 91 FY2013_Supplementals_2-12-2013_Amendments.pdf HFIN 2/14/2013 1:30:00 PM
HB 64 FY2014_Capital_Amend_Spreadsheet.pdf HFIN 2/14/2013 1:30:00 PM
HB 65 FY2014_Operating_Amend_Spreadsheet.pdf HFIN 2/14/2013 1:30:00 PM
HB 65
HB 65 FY2014_Gov_Amend_Summary.pdf HFIN 2/14/2013 1:30:00 PM
HB 65
FY2014_Governor_Amended_Fiscal_Summary.pdf HFIN 2/14/2013 1:30:00 PM
Gov Amendments Summary