Legislature(2017 - 2018)HOUSE FINANCE 519

02/16/2017 01:30 PM FINANCE

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Audio Topic
01:35:00 PM Start
01:35:45 PM Overview: Governor's Fy 18 Budget Amendments
01:35:54 PM HB57 || HB59
02:32:35 PM HB23
02:50:33 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 57 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+= HB 59 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
+ Overview: Governor's Budget Amendments by Pat TELECONFERENCED
Pitney, Director, OMB, Office of the Governor
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 23 INS. FOR DEPENDS. OF DECEASED FIRE/POLICE TELECONFERENCED
Moved CSHB 23(FIN) Out of Committee
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 16, 2017                                                                                          
                         1:35 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:35:00 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Seaton called the House Finance Committee meeting                                                                      
to order at 1:35 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Paul Seaton, Co-Chair                                                                                            
Representative Les Gara, Vice-Chair                                                                                             
Representative Jason Grenn                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Dan Ortiz                                                                                                        
Representative Lance Pruitt                                                                                                     
Representative Cathy Tilton                                                                                                     
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Steve Thompson                                                                                                   
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Pat  Pitney,  Director,  Office of  Management  and  Budget,                                                                    
Office of the Governor;  Jane Pierson, Staff, Representative                                                                    
Neal  Foster;  Lisa  Weissler,  Staff,  Representative  Andy                                                                    
Josephson;    Representative   Andy    Josephson,   Sponsor;                                                                    
Representative Charisse Millett.                                                                                                
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Daniel Wayne, Attorney, Legislative Legal Services.                                                                             
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 23     INS. FOR DEPENDS. OF DECEASED FIRE/POLICE                                                                             
                                                                                                                                
          CSHB 23(FIN) was REPORTED out of committee with a                                                                     
          "do pass" recommendation and with one new zero                                                                        
          fiscal    note    from     the    Department    of                                                                    
          Administration; one new zero  fiscal note from the                                                                    
          Department of  Public Safety;  and one  new fiscal                                                                    
          impact note  from the Office  of the  Governor for                                                                    
          Fund Capitalization.                                                                                                  
                                                                                                                                
HB 57     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
                                                                                                                                
          HB 57 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 59     APPROP: MENTAL HEALTH BUDGET                                                                                          
                                                                                                                                
          HB 59 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
OVERVIEW: GOVERNOR'S FY 18 BUDGET AMENDMENTS                                                                                    
                                                                                                                                
Co-Chair Seaton addressed the meeting agenda.                                                                                   
                                                                                                                                
^OVERVIEW: GOVERNOR'S FY 18 BUDGET AMENDMENTS                                                                                 
                                                                                                                                
1:35:45 PM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 57                                                                                                             
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;   repealing    appropriations;   making                                                                    
     supplemental  appropriations and  reappropriations, and                                                                    
     making  appropriations  under   art.  IX,  sec.  17(c),                                                                    
     Constitution  of   the  State   of  Alaska,   from  the                                                                    
     constitutional budget  reserve fund; and  providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
HOUSE BILL NO. 59                                                                                                             
                                                                                                                                
     "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."                                                                                                        
                                                                                                                                
1:35:54 PM                                                                                                                    
                                                                                                                                
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE  OF  THE GOVERNOR,  expressed  her  intent to  review                                                                    
amendments submitted  by the governor's office  the previous                                                                    
day.   She  provided   a   PowerPoint  presentation   titled                                                                    
"Governor's  Budget  Amendments,  House  Finance  Committee"                                                                    
dated February  16, 2017  (copy on  file). She  reminded the                                                                    
committee there  was a tremendous amount  of backup material                                                                    
related  to each  of  the amendment  items.  The backup  was                                                                    
available  in   members'  packets  and  on   the  Office  of                                                                    
Management  and Budget  (OMB) website  (copy  on file).  She                                                                    
shared that the amendments had  also been transferred to the                                                                    
Legislative  Finance  Division   (LFD)  system.  The  packet                                                                    
included  amendments  to the  FY  18  operating and  capital                                                                    
budgets and to the FY 17 supplemental budget.                                                                                   
                                                                                                                                
Ms. Pitney  addressed slide 1,  which included a  summary of                                                                    
items impacting the FY 18  budget. The total FY 18 amendment                                                                    
request  was  $58  million, of  which,  $2.449  million  was                                                                    
unrestricted general  fund (UGF). The majority  of the total                                                                    
fell under the  "other funds" category and  was comprised of                                                                    
international airports and highway funds.                                                                                       
                                                                                                                                
1:38:39 PM                                                                                                                    
                                                                                                                                
Ms.    Pitney   briefly    highlighted   slide    2   titled                                                                    
"UGF/DGF/Other/Fed Summary  by Department  Ignoring Included                                                                    
(1137)" and  slide 3 titled  "Department Two  Way Comparison                                                                    
UGF/DGF/Other/Fed (1191)," which  were operating and capital                                                                    
budget summaries respectively.                                                                                                  
                                                                                                                                
Ms. Pitney turned  to operating budget amendments  for HB 57                                                                    
and HB 59 on  slides 4 through 8. She noted  an error in the                                                                    
title and  explained the slides  pertained to FY 18  (not FY                                                                    
17). She began  on slide 4, line 1. The  first amendment was                                                                    
to   delete  a   deputy  commissioner   position  from   the                                                                    
Department  of  Administration  (DOA),   which  would  be  a                                                                    
decrease  in the  budget of  $173,000 in  general funds  and                                                                    
$15,000 in other  funds. Lines 2 and 3 were  technical - the                                                                    
amendment would  change where the  state was  accounting for                                                                    
the  State  of  Alaska  Telecommunications  System  and  the                                                                    
Alaska   Land  Mobile   Radio  (ALMR)   for  budgeting   and                                                                    
accounting  purposes; the  two  amendments  had no  monetary                                                                    
impact,  but had  a budget  structure impact.  She moved  to                                                                    
slide  4, lines  4  and  5. Both  lines  pertained to  grant                                                                    
opportunities that had not previously  been accounted for in                                                                    
the FY  18 budget for  the Division of Motor  Vehicles (DMV)                                                                    
and Community Resource for Justice Incorporated.                                                                                
                                                                                                                                
1:40:49 PM                                                                                                                    
                                                                                                                                
Representative  Wilson pointed  to the  $500,000 for  DMV on                                                                    
line 4.  She asked  about the previous  fund source  for the                                                                    
item.  She wondered  if  the program  had  been costing  the                                                                    
state $500,000 in UGF.                                                                                                          
                                                                                                                                
Ms. Pitney replied in the  negative; the item was the result                                                                    
of an  audit of  the state's contracted  commercial driver's                                                                    
license  trainers. The  audit  required  more oversight  and                                                                    
evidence  that  the  contractors   were  meeting  the  right                                                                    
standards  in  the training.  The  increment  was a  federal                                                                    
grant  to  help  the  state   implement  the  oversight  and                                                                    
training standards.                                                                                                             
                                                                                                                                
Representative  Wilson asked  for  verification the  program                                                                    
was new. She  surmised that the audit was based  on 2015 law                                                                    
and that general funds were not used for the item.                                                                              
                                                                                                                                
Ms.  Pitney explained  that a  federal audit  had found  the                                                                    
state  to be  out  of compliance.  The  federal grant  would                                                                    
enable the state to get into compliance.                                                                                        
                                                                                                                                
Representative Pruitt referred to slide  4, line 5 and asked                                                                    
for   detail   about    Community   Resource   for   Justice                                                                    
Incorporated and the other funds included in the increment.                                                                     
                                                                                                                                
Ms.  Pitney  replied she  would  follow  up. The  group  was                                                                    
recognized by  the Alaska Criminal Justice  Commission - the                                                                    
commission  had  been  the  primary  driver  in  moving  the                                                                    
justice  reform   initiative  forward.  She  did   not  have                                                                    
specifics about Community  Resource for Justice Incorporated                                                                    
on hand.                                                                                                                        
                                                                                                                                
Co-Chair  Seaton asked  Ms.  Pitney to  follow  up with  the                                                                    
information.                                                                                                                    
                                                                                                                                
1:43:27 PM                                                                                                                    
                                                                                                                                
Ms. Pitney  referred to slide  5 related to FY  18 operating                                                                    
amendments. She relayed lines 6, 12,  13, and 17 [on pages 5                                                                    
through  7] were  all related  to  the Technical  Vocational                                                                    
Education Program  (TVEP). She explained that  the TVEP fund                                                                    
was  comprised of  funding from  the unemployment  insurance                                                                    
directed towards training. She  detailed there was a formula                                                                    
distribution  to which  training  providers received  funds.                                                                    
Due  to the  downturn in  the  state's economy,  it was  not                                                                    
collecting as  much unemployment  insurance as in  the past.                                                                    
The  amendment  decreased  the amount  of  money  the  state                                                                    
anticipated receiving in FY 18  by $1.3 million. The Student                                                                    
and  School  Achievement  portion of  the  distribution  was                                                                    
being  reduced by  $52,000. Lines  12,  13, and  17 had  the                                                                    
remainder of the reductions.                                                                                                    
                                                                                                                                
Representative  Guttenberg referred  to declining  taxes. He                                                                    
asked if  there was  an estimate  of what  would be  lost in                                                                    
training facilities as a result.  He remarked that the items                                                                    
were grants. He asked for the total collected tax amount.                                                                       
                                                                                                                                
Ms.  Pitney  answered  that  she  did  not  know  the  total                                                                    
collected tax,  but $11.9 million equaled  1.6 percent [0.16                                                                    
percent per the  slide] of the tax [TVEP was  funded by 0.16                                                                    
percent  of  employee   contributions  to  the  unemployment                                                                    
insurance  trust fund].  She  moved  to line  7  on slide  5                                                                    
related   to  child   nutrition   programs.  The   increment                                                                    
reflected  an increase  of  federal  funds totaling  $10.172                                                                    
million  for  the  school  lunch  program  and  other  child                                                                    
nutrition  programs. Line  8 was  a technical  adjustment to                                                                    
account for a health  insurance rate increase. She explained                                                                    
that because of  the way the receipts worked it  had to be a                                                                    
two-sided  transaction. The  governor's original  budget had                                                                    
inadvertently missed  one side  of the transaction.  Lines 9                                                                    
through 11 all related to  Department of Fish and Game (DFG)                                                                    
statutory designated receipts.                                                                                                  
                                                                                                                                
Representative  Wilson referred  back to  line 8.  She asked                                                                    
for verification that health insurance  for the Student Loan                                                                    
Corporation had gone  up $115,000 in 2017 and  it would cost                                                                    
and additional $197,300 for the health insurance payment.                                                                       
                                                                                                                                
Ms.  Pitney answered  that the  FY 17  supplemental she  had                                                                    
presented within  the past  couple of  weeks had  included a                                                                    
mid-year health  insurance rate increase that  accounted for                                                                    
the $115,000.  The mid-year rate increase  through an entire                                                                    
year in  FY 18 was $197,000.  She stated it was  $115,000 in                                                                    
the current  year for a  total of $197,000 in  the following                                                                    
year. She clarified that the two numbers were not additive.                                                                     
                                                                                                                                
1:48:13 PM                                                                                                                    
                                                                                                                                
Representative Wilson wondered if  similar numbers were seen                                                                    
throughout other  departments. Ms. Pitney replied  the total                                                                    
increase  for  the  mid-year  was  $6.2  million,  of  which                                                                    
roughly  $4-plus million  was  UGF. She  noted  that her  $4                                                                    
million figure could  be off. The FY 18  budget submitted by                                                                    
the  governor  in  mid-December  [2016]  included  the  rate                                                                    
increase and it was in the range of $14 million.                                                                                
                                                                                                                                
Representative  Wilson   stated  it  was  a   hard  item  to                                                                    
understand  when  the  cost  was  presented  in  silos.  She                                                                    
thought it may be prudent to  have the discussion as part of                                                                    
the operating  budget. She wondered  how much  insurance had                                                                    
gone up overall  and what the state could  expect. She noted                                                                    
the items  were only seen individually  and only represented                                                                    
a portion  of a  much larger picture.  She thought  a bigger                                                                    
discussion  would be  about action  that could  be taken  to                                                                    
prevent increases from being so high.                                                                                           
                                                                                                                                
Vice-Chair Gara  believed the administration was  working on                                                                    
the issue, but health insurance  costs continued to rise. He                                                                    
was happy to work on the issue with the administration.                                                                         
                                                                                                                                
Ms.  Pitney  answered  there  was  an  administrative  group                                                                    
working   on  the   [healthcare   cost]   issue.  The   more                                                                    
legislators working with the  administration the better. The                                                                    
goal was  to look at costs  for all of Alaska  - the problem                                                                    
impacted  every employer  and  residents  without access  to                                                                    
healthcare. The state ended up  subsidizing the amounts both                                                                    
indirectly  and directly.  The cost  needed to  be addressed                                                                    
across the board.                                                                                                               
                                                                                                                                
1:51:03 PM                                                                                                                    
                                                                                                                                
Ms.  Pitney  spoke to  lines  9  through  11 that  were  DFG                                                                    
projects that  private nonprofit  entities or  industry were                                                                    
willing to  continue through grants.  She noted  the amounts                                                                    
were in the other funds  category. The three increments were                                                                    
for  a Coho  salmon  and dive  fisheries research  projects,                                                                    
Bristol Bay  Science Research Institute  watershed projects,                                                                    
and  stock  assessment  projects,   which  totaled  over  $1                                                                    
million in grants to the state.                                                                                                 
                                                                                                                                
Co-Chair  Seaton  asked  for verification  the  slide  title                                                                    
should read FY 18. Ms. Pitney replied in the affirmative.                                                                       
                                                                                                                                
Ms. Pitney  turned to slide  6, lines  12 and 13  related to                                                                    
TVEP funding. Line  12 included a $448,000  reduction to the                                                                    
workforce  development  and  line  13  included  a  $224,000                                                                    
reduction  to Alaska  Vocational  Technical Center  (AVTEC).                                                                    
Line 14  included an increment  for the Council  on Domestic                                                                    
Violence  and Sexual  Assault  (CDVSA)  totaling $1  million                                                                    
from the Recidivism Reduction Fund.  She explained the money                                                                    
had been  included in  a fiscal  note and  had inadvertently                                                                    
been left out.                                                                                                                  
                                                                                                                                
Representative Guttenberg  asked how  much was  currently in                                                                    
the Recidivism Reduction Fund.                                                                                                  
                                                                                                                                
1:52:58 PM                                                                                                                    
                                                                                                                                
Ms.  Pitney  did not  have  the  number  on hand.  The  fund                                                                    
received receipts  from the marijuana  tax. She  believed it                                                                    
was on track.                                                                                                                   
                                                                                                                                
Representative Guttenberg believed 50  percent of the fund's                                                                    
allocations  would  go  towards   programs  like  CDVSA  and                                                                    
rehabilitation programs.  He reasoned  the programs  did not                                                                    
open overnight  and the marijuana  industry did  not blossom                                                                    
overnight.                                                                                                                      
                                                                                                                                
Ms.  Pitney turned  to line  15 was  related to  the wording                                                                    
associated  with the  change record  for the  reorganization                                                                    
and  optimization of  the Department  of Transportation  and                                                                    
Public Facilities  (DOT) design entities. The  item included                                                                    
language-only  changes that  referenced the  requirement for                                                                    
the feasibility study consistent with union contracts.                                                                          
                                                                                                                                
1:54:37 PM                                                                                                                    
                                                                                                                                
Ms. Pitney  moved to  page 7, line  16 included  a technical                                                                    
adjustment  where only  one side  of the  transaction for  a                                                                    
health  insurance  rate  increase   for  the  Alaska  Marine                                                                    
Highway System  (AMHS) had been  included in  the governor's                                                                    
original  proposed budget.  She explained  that it  had been                                                                    
included in the total.                                                                                                          
                                                                                                                                
Representative Wilson  requested a list showing  how much an                                                                    
employee  had to  contribute to  their  health insurance  in                                                                    
each  union  and  others.  She   asked  about  the  employee                                                                    
contributions  before the  newest contract  and at  present.                                                                    
She was interested in the  bigger picture instead of looking                                                                    
at the costs in silos.                                                                                                          
                                                                                                                                
Ms.  Pitney replied  in the  affirmative. The  Department of                                                                    
Administration (DOA) had provided the information.                                                                              
                                                                                                                                
Vice-Chair  Gara referred  to lines  9 through  11 that  all                                                                    
seemed  to be  new private  funds.  He asked  Ms. Pitney  to                                                                    
point out where  the other funds were not  private funds. He                                                                    
surmised  that the  agencies were  probably  being asked  to                                                                    
absorb those costs.                                                                                                             
                                                                                                                                
1:56:44 PM                                                                                                                    
                                                                                                                                
Ms. Pitney  agreed. She advanced  to a University  of Alaska                                                                    
TVEP decrement  of $593,000 item on  line 17. Line 18  was a                                                                    
Mat-Su Foundation  grant for  the therapeutic  courts. Lines                                                                    
19  through  21 pertained  to  the  Judiciary and  were  all                                                                    
technical corrections to align  its budget with the expected                                                                    
reality  -  reflecting  an  additional  $23,000  in  general                                                                    
funds.                                                                                                                          
                                                                                                                                
Co-Chair  Seaton  referred to  line  15  and asked  how  the                                                                    
feasibility study would coincide  with scheduled layoffs. He                                                                    
asked for detail.                                                                                                               
                                                                                                                                
Ms. Pitney  replied that  76 positions  had been  deleted in                                                                    
the  FY 18  budget.  The positions  were  anticipated to  be                                                                    
vacant  without  layoff prior  to  the  end  of FY  17.  She                                                                    
explained  that  consistent  with union  contracts,  layoffs                                                                    
required a  feasibility study. Therefore, there  would be no                                                                    
layoffs prior to the completion of the study.                                                                                   
                                                                                                                                
1:58:50 PM                                                                                                                    
                                                                                                                                
Representative Grenn asked for  the feasibility study timing                                                                    
pertaining to layoffs.                                                                                                          
                                                                                                                                
Ms. Pitney replied there was  an elimination of 76 positions                                                                    
in the FY 18 budget -  the positions would cease to exist on                                                                    
July 1. The administration  anticipated all of the positions                                                                    
to  be  empty  by  July  1 without  needing  a  layoff.  The                                                                    
feasibility study would start within  the next 30 to 60 days                                                                    
and  should be  completed  in September  or October  [2017].                                                                    
Depending  on  the direction  of  the  study, there  may  be                                                                    
positions put forward for the FY 19 budget.                                                                                     
                                                                                                                                
1:59:50 PM                                                                                                                    
                                                                                                                                
Ms. Pitney moved to lines 22 and 23 on slide 7.                                                                                 
                                                                                                                                
Co-Chair Seaton  asked for verification the  slide pertained                                                                    
to FY 18.                                                                                                                       
                                                                                                                                
Ms.  Pitney  affirmed.  Lines  22  and  23  related  to  the                                                                    
international airport  system budget  and its  debt service.                                                                    
She added  that a  related increment  would appear  later in                                                                    
her  presentation  pertaining  to  the  FY  17  supplemental                                                                    
budget. She  detailed that the international  airport system                                                                    
wanted early  redemption of some  of its revenue  bonds. The                                                                    
system had planned the early  redemption in FY 17, which was                                                                    
being  delayed   to  FY  18.  Therefore,   a  reduction  was                                                                    
reflected in the  system's FY 17 budget and  an increase was                                                                    
reflected   in  its   FY   18   budget.  Additionally,   the                                                                    
administration   wanted   transparency  in   the   borrowing                                                                    
agreement between  the international airport system  and the                                                                    
General  Fund (GF).  The  system used  GF  while waiting  on                                                                    
receivables from  federal international highway  funds. Line                                                                    
23   included   a   language  item   specifying   that   the                                                                    
international  airport system  could  borrow  from GF  while                                                                    
waiting  on  federal money.  The  system  would pay  the  GF                                                                    
interest  at the  federal rate  plus 3  percent or  whatever                                                                    
amount  the GF  was  earning  if it  was  earning more.  She                                                                    
characterized it as a win-win  because otherwise the airport                                                                    
system would  have to get a  line of credit, which  would be                                                                    
more expensive, and the state would not earn the interest.                                                                      
                                                                                                                                
Vice-Chair Gara  noted that almost every  year someone asked                                                                    
if DOT had  finally started getting costs  for the Deadhorse                                                                    
airport to  be paid by  users. He  asked if the  airport was                                                                    
self-funding with user fees.                                                                                                    
                                                                                                                                
Ms. Pitney replied she would follow up.                                                                                         
                                                                                                                                
Vice-Chair Gara hoped the self-funding could be achieved.                                                                       
                                                                                                                                
Ms. Pitney  spoke to FY  18 operating amendments on  page 8.                                                                    
Line  24 reflected  a change  in timing  for budgeting.  She                                                                    
explained  that  the  Oil and  Hazardous  Substance  Release                                                                    
Prevention and Response Fund had  been using projected FY 18                                                                    
receipts  to set  its  FY  18 budget.  The  item included  a                                                                    
downward  adjustment  in  FY 17.  Rather  than  setting  the                                                                    
budget  on the  projected  FY  18, they  wanted  to set  the                                                                    
budget  based on  FY 17  receipts in  order to  achieve much                                                                    
more accuracy. The supplemental request  would set the FY 17                                                                    
on  FY  16  receipts.   It  provided  more  accurate  budget                                                                    
reflection.                                                                                                                     
                                                                                                                                
2:05:36 PM                                                                                                                    
                                                                                                                                
Representative  Wilson  wondered  why  the  funds  were  UGF                                                                    
versus designated  general funds  (DGF). She  remarked there                                                                    
was over $6 million in the specific fund.                                                                                       
                                                                                                                                
Ms. Pitney  answered believed that  although the  funds were                                                                    
in a segregated fund, they were classified as UGF.                                                                              
                                                                                                                                
2:06:22 PM                                                                                                                    
                                                                                                                                
Ms.  Pitney  advanced  to  line 25  related  to  salary  and                                                                    
benefits   adjustment   for   all  bargaining   units.   All                                                                    
bargaining  units  had not  been  included  in the  original                                                                    
language - line 25 made  the correction. Line 26 reflected a                                                                    
revised Alaska  Industrial Development and  Export Authority                                                                    
(AIDEA) dividend  that took place between  December 15 [2016                                                                    
and  current  day.  The dividend  had  increased  from  $9.5                                                                    
million to $12.8  million. Line 26 was a  language item, but                                                                    
reflected an increase in revenue available for state spend.                                                                     
                                                                                                                                
Vice-Chair Gara asked why a number  was not listed if it was                                                                    
a budget savings. Ms. Pitney  replied it was a language item                                                                    
and a revised revenue estimate of $12.8 million.                                                                                
                                                                                                                                
2:07:53 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Gara asked  for verification  the money  did not                                                                    
normally go  back to AIDEA  and reflected a dividend  to the                                                                    
state. Ms. Pitney  replied in the affirmative;  it was money                                                                    
from AIDEA to the state GF.                                                                                                     
                                                                                                                                
Co-Chair Seaton  asked for verification the  slide reflected                                                                    
FY 18  operating budget  totals. Ms.  Pitney replied  in the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
2:08:46 PM                                                                                                                    
                                                                                                                                
Ms. Pitney addressed FY 18  capital budget amendments for HB                                                                    
58/SB 23  on slides  9 and  10. She referred  to line  1 and                                                                    
explained  that  she  had  discussed  the  item  during  the                                                                    
supplementals when  a reappropriation  had been made  in the                                                                    
amount  of  $3 million  for  ALMR.  She had  testified  that                                                                    
another  $1.5 million  would be  needed. The  administration                                                                    
had  looked for  additional  reappropriations  and had  been                                                                    
unable to  find them.  The line  pertained to  the remaining                                                                    
amount that made the current  year's maintenance and upgrade                                                                    
total whole.                                                                                                                    
                                                                                                                                
Ms. Pitney  advanced to  line 2  on slide  9 related  to the                                                                    
case management  database system for DOA.  The increment was                                                                    
$665,000 to  implement a case  system consistent  with those                                                                    
used by  the Court System  and the Department of  Law (DOL).                                                                    
The current  system used by  the Public Defender  Agency and                                                                    
the Office  of Public Advocacy  was no longer  supported and                                                                    
needed  to  be  upgraded.  There was  endorsement  from  the                                                                    
courts and  DOL that  the system  would make  discovery much                                                                    
more  efficient   and  timing  for  court   cases  would  be                                                                    
improved.  Lines 3  through 6  all related  to the  National                                                                    
Petroleum Reserve-Alaska Impact  Grant Program. The estimate                                                                    
initially put  forward in  the FY 18  budget was  reduced by                                                                    
$1.8 million  (more than 50  percent), which was  related to                                                                    
the  number of  leases and  rents and  royalties on  federal                                                                    
lands shared  50/50 with  the state.  There was  currently a                                                                    
lease sale  underway, which could  possibly bring  the total                                                                    
closer   to  the   traditional  about   $3.5  million.   The                                                                    
allocations  were done  in  January -  of  the roughly  $1.3                                                                    
million remaining  it represented a distribution  to various                                                                    
communities receiving money from the impact grant program.                                                                      
                                                                                                                                
2:12:16 PM                                                                                                                    
                                                                                                                                
Ms. Pitney addressed page 10,  line 7 that would provide the                                                                    
Department  of Environmental  Conservation with  the ability                                                                    
to accept  a federal grant  for a heating  device change-out                                                                    
program  valued  at  $2.4  million.  Line  8  reflected  the                                                                    
inclusion of  fleet replacement funds from  other funds. She                                                                    
detailed  there was  a renewal  and replacement  process for                                                                    
agencies using  fleet vehicles. The increment  would replace                                                                    
the  oldest  and highest  mileage  vehicles  on a  scheduled                                                                    
basis. The  increment only  covered about  5 percent  of the                                                                    
entire fleet. She added that  the reason the fund source was                                                                    
other funds  was because it  was funds already  collected in                                                                    
the State Equipment Fleet Fund.                                                                                                 
                                                                                                                                
Representative Wilson  asked for verification  that although                                                                    
the  money was  going  into  a fund,  the  funds were  still                                                                    
basically general funds used for the vehicles.                                                                                  
                                                                                                                                
Ms. Pitney  replied it was  probably less than half  GF. For                                                                    
DOT, depending on  the split between GF  and federal highway                                                                    
funds, it  could be as  much as 90 percent  federal funding.                                                                    
For  Department of  Public Safety  that participated  in the                                                                    
[renewal/replacement]  process  with  its trooper  cars  the                                                                    
funds would be  largely GF. In total the  increment was less                                                                    
than half GF.                                                                                                                   
                                                                                                                                
Representative  Wilson asked  for a  breakdown of  the fund,                                                                    
specifically  related to  its  composition  of state  versus                                                                    
federal  funds.  She asked  what  constituted  old and  high                                                                    
mileage.                                                                                                                        
                                                                                                                                
Ms.   Pitney  answered   she   would   provide  a   complete                                                                    
replacement  schedule. The  items  on the  schedule at  hand                                                                    
covered  some vehicles  from  the 1980s  and  1990s; it  was                                                                    
different depending on the  vehicles. The schedules included                                                                    
the replacement time frame and  a usage replacement - it was                                                                    
different  depending  on  the  vehicle.  She  detailed  that                                                                    
trooper vehicles  had recently  gone from  a five-year  to a                                                                    
six-year  replacement  and  from  a  100,000-mile  limit  to                                                                    
130,000-mile limit.  Over the course  of the past  few years                                                                    
the  refresh schedule  had been  extended for  all types  of                                                                    
vehicles.  The administration  had  a  breakdown of  exactly                                                                    
what  the $15  million was  slated  to cover  and why  those                                                                    
particular  vehicles  were  on  the  top  of  the  list  for                                                                    
replacement.                                                                                                                    
                                                                                                                                
2:16:06 PM                                                                                                                    
                                                                                                                                
Ms.  Pitney  referred to  the  capital  amendments total  of                                                                    
$2.199 million  UGF and $17  million in total at  the bottom                                                                    
of slide  10. She advanced  to an FY 17  supplemental budget                                                                    
amendments summary  on slide  11. The top  half of  the page                                                                    
showed  the  supplemental  requests put  forward  two  weeks                                                                    
earlier  in the  supplemental bill.  The lower  half of  the                                                                    
page  showed  a  summary  of  what  the  administration  was                                                                    
submitting at present. The most  significant item related to                                                                    
fire suppression  expenses. She  noted fire  suppression had                                                                    
been inadvertently  left out.  The total  supplemental total                                                                    
was $14.4 million UGF, but  due to the international highway                                                                    
fund decrease that had been pushed  from FY 17 to FY 18, the                                                                    
actual supplemental total was a negative $8.8 million.                                                                          
                                                                                                                                
Ms.  Pitney discussed  slides 12  through 14  titled "FY2017                                                                    
Supplemental Amendments Submitted  February 14, 2017." Lines                                                                    
2 and  3 on slide  12 were technical  adjustments accounting                                                                    
for expenses incidental to the  sale and issuance of general                                                                    
obligation  bonds. The  amounts were  a negative  $3 million                                                                    
and a  positive $745 million -  the intent was to  match the                                                                    
FY  17 budget  with the  anticipated actual  issuance costs.                                                                    
She noted the increments  were multi-year appropriations for                                                                    
the general  obligation bond  sales. Line  5 included  a UGF                                                                    
increment for  the Office of Public  Advocacy. She specified                                                                    
that the reductions  to the public defenders  and the Office                                                                    
of Public  Advocacy (OPA) had  been very tight.  The request                                                                    
was to  accommodate the  extra effort related  to a  case in                                                                    
Palmer; there  were five defendants. Public  defenders could                                                                    
have  one defendant  and OPA  was representing  four of  the                                                                    
individuals.                                                                                                                    
                                                                                                                                
2:19:52 PM                                                                                                                    
                                                                                                                                
Ms.  Pitney  turned to  page  13,  line  6 related  to  fire                                                                    
suppression for FY  17 totaling $15 million.  She noted that                                                                    
her office  had sent  a response  that morning  to questions                                                                    
about the  balance of  the fire  fund and  other accounting.                                                                    
The  balance  and  historical  trend  was  provided  in  the                                                                    
information.  Line  7 allowed  for  the  extension of  money                                                                    
already  appropriated for  outside  counsel  and North  Pole                                                                    
remedial action  appropriation related to a  Flint Hills and                                                                    
Williams water issue.                                                                                                           
                                                                                                                                
Representative  Pruitt  understood  a  conclusion  had  been                                                                    
determined. He wondered if some  of the state costs would be                                                                    
covered in the conclusion.                                                                                                      
                                                                                                                                
Ms. Pitney  knew it was still  active, but she did  not know                                                                    
the specifics.                                                                                                                  
                                                                                                                                
Representative  Pruitt thought  it sounded  like a  positive                                                                    
thing for the state.                                                                                                            
                                                                                                                                
Representative  Wilson  relayed  that the  state  was  suing                                                                    
Williams as well. The agreement  was between Flint Hills and                                                                    
the state. The  ongoing litigation was between  the city and                                                                    
Williams to see if the  courts would decide whether they had                                                                    
some kind  of share. The  other portions would  hopefully be                                                                    
settled after a  public gathering in her  community one week                                                                    
from the coming Saturday.                                                                                                       
                                                                                                                                
Ms.  Pitney  spoke  to  line   8  on  slide  13  related  to                                                                    
International Airports Revenue Fund  for early redemption of                                                                    
international airports revenue bonds.  She detailed that the                                                                    
airports had  planned to  do the early  redemption in  FY 17                                                                    
and were delaying it  to FY 18 - the FY  17 budget was being                                                                    
reduced. She noted that earlier  in her presentation she had                                                                    
addressed the FY 18 increase.                                                                                                   
                                                                                                                                
2:22:58 PM                                                                                                                    
                                                                                                                                
Ms.  Pitney  moved to  line  9  included the  same  language                                                                    
related  to international  airport that  allowed transparent                                                                    
borrowing  between International  Airports Revenue  Fund and                                                                    
the  GF  effective  FY  17.  Line  10  pertained  to  FY  17                                                                    
estimated  collections  related  to the  Oil  and  Hazardous                                                                    
Substance  Release Prevention  and Response  Fund. The  item                                                                    
was  a  reduction  in  the  FY 17  budget  based  on  FY  16                                                                    
receipts.  The  last  item  on   line  12,  page  14  was  a                                                                    
reappropriation  of   $10  million  for  the   Izembek  Road                                                                    
project.  She explained  that the  House (through  its Joint                                                                    
Resolution 6) supported  the federal action to  build a road                                                                    
through the  Izembek area. She  explained it was one  of the                                                                    
governor's priorities  and had been a  long-time priority of                                                                    
the state. She elaborated  that the item would reappropriate                                                                    
$10 million from  projects that had been  federalized and no                                                                    
longer required GF. The supplemental  request reduced the FY                                                                    
17 total  by $8.8 million,  but included an increase  of $14                                                                    
million in GF for fire suppression and other items.                                                                             
                                                                                                                                
HB  57  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HB  59  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
2:25:06 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:32:29 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HOUSE BILL NO. 23                                                                                                             
                                                                                                                                
     "An Act  relating to  major medical  insurance coverage                                                                    
     under  the  Public   Employees'  Retirement  System  of                                                                    
     Alaska  for  certain  surviving spouses  and  dependent                                                                    
     children  of  peace   officers  and  firefighters;  and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
2:32:35 PM                                                                                                                    
                                                                                                                                
Co-Chair  Seaton  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute  for  HB  23,   Work  Draft  30-LS0258\U  (Wayne,                                                                    
2/10/17).                                                                                                                       
                                                                                                                                
Representative Pruitt OBJECTED for discussion.                                                                                  
                                                                                                                                
JANE PIERSON,  STAFF, REPRESENTATIVE NEAL  FOSTER, discussed                                                                    
the changes in the committee substitute (CS):                                                                                   
                                                                                                                                
     The  first change  occurred when  the committee  passed                                                                    
     Amendment  1(a), which  changed  "health" insurance  to                                                                    
     "medical" insurance throughout  the bill, insuring that                                                                    
     the  surviving  dependents  of   a  fallen  officer  is                                                                    
     granted the  same level  of medical  insurance benefits                                                                    
     the deceased employee was receiving  at the time of the                                                                    
     employee's death as directed by  the bill (see, page 3,                                                                    
     lines 14-16).                                                                                                              
                                                                                                                                
     The next  amendment the committee passed  was Amendment                                                                    
     3, as amended.   These changes can be found  on page 3,                                                                    
     lines  14  through  26,  which  clarify  the  level  of                                                                    
     insurance that  is required,  how payments  of premiums                                                                    
     shall  be  paid.   Additionally,  on  page 4,  lines  7                                                                    
     through   9  and   13  through   15  large   and  small                                                                    
     municipalities are defined.                                                                                                
                                                                                                                                
     The  next amendment  that passed  was  Amendment 4,  on                                                                    
     page  3, line  7 that  changed age  65 to  eligible for                                                                    
     Medicare.                                                                                                                  
                                                                                                                                
     The committee  in passing  Amendment 10  changed police                                                                    
     to  peace officer  throughout the  bill  and defined  a                                                                    
     peace officer  on page 4,  lines 10 through 12  to mean                                                                    
     an employee  occupying a position  as a  peace officer,                                                                    
     chief  of  police,   regional  public  safety  officer,                                                                    
     correctional  officer, correctional  superintendent, or                                                                    
     probation officer.                                                                                                         
                                                                                                                                
     The  final changes  to  this bill  were  made when  the                                                                    
     committee passed Amendment  13(a) simplifying how money                                                                    
     is appropriated to the fund.                                                                                               
                                                                                                                                
2:35:41 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  relayed the committee  had passed  a number                                                                    
of amendments the previous week,  which had been rolled into                                                                    
the  current  CS.  He  listed  people  available  to  answer                                                                    
questions. He noted that  Representative Kawasaki had joined                                                                    
the meeting.                                                                                                                    
                                                                                                                                
Representative  Guttenberg pointed  to the  definition of  a                                                                    
peace officer on  page 4 line 10. He wanted  to ensure there                                                                    
were no unintended consequences caused  by the change to the                                                                    
definition.                                                                                                                     
                                                                                                                                
Ms.  Pierson answered  that the  committee had  expanded the                                                                    
definition  and had  not eliminated  anything that  had been                                                                    
previously in the bill.                                                                                                         
                                                                                                                                
Representative Guttenberg clarified  his question. He wanted                                                                    
to ensure  there were not  unintended consequences  in other                                                                    
places.                                                                                                                         
                                                                                                                                
Co-Chair Foster recognized  bill sponsor Representative Andy                                                                    
Josephson in the audience.                                                                                                      
                                                                                                                                
Ms.  Pierson  deferred  the question  to  Legislative  Legal                                                                    
Services.                                                                                                                       
                                                                                                                                
DANIEL  WAYNE,  ATTORNEY,  LEGISLATIVE LEGAL  SERVICES  (via                                                                    
teleconference),   summarized  his   understanding  of   the                                                                    
question.  He  asked  for verification  that  Representative                                                                    
Guttenberg was  asking whether anyone had  been dropped from                                                                    
the definition of peace officer.                                                                                                
                                                                                                                                
Representative Guttenberg replied in the affirmative.                                                                           
                                                                                                                                
Mr. Wayne answered that he  did not believe the change would                                                                    
have  any unforeseen  consequences. The  previous definition                                                                    
had  included   Department  of  Transportation   and  Public                                                                    
Facilities employees and University  of Alaska employees who                                                                    
had  general  police  powers  to arrest  and  so  forth.  He                                                                    
believed  the individuals  would qualify  as peace  officers                                                                    
under the bill's updated definition.                                                                                            
                                                                                                                                
Vice-Chair  Gara asked  for verification  that Medicaid  did                                                                    
not count under the legislation, but Medicare did.                                                                              
                                                                                                                                
LISA   WEISSLER,  STAFF,   REPRESENTATIVE  ANDY   JOSEPHSON,                                                                    
replied that  medical, throughout the bill,  referred to the                                                                    
level of coverage at the  time of an employee's death, while                                                                    
major  medical   came  into  play  for   ineligibility.  She                                                                    
addressed whether Medicare was  considered major medical and                                                                    
did not believe  it mattered for the purpose -  the bill set                                                                    
the  criteria  and  made  it  quite  specific  in  terms  of                                                                    
becoming eligible for major medical or Medicare.                                                                                
                                                                                                                                
2:40:35 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Gara  surmised  it   was  the  level  of  health                                                                    
insurance  a person  had previously  and once  an individual                                                                    
reached   the  Medicare   eligibility  age,   they  received                                                                    
Medicare.                                                                                                                       
                                                                                                                                
Ms. Weissler replied in the affirmative.                                                                                        
                                                                                                                                
Representative  Wilson   noted  Alaska's   Medicaid  program                                                                    
covered  much more  than in  some other  states. She  stated                                                                    
that Medicaid would be medical  insurance. She believed that                                                                    
it  probably would  not happen  for most  of the  population                                                                    
impacted by  the bill. She  surmised that Medicaid  would be                                                                    
the same as if the state were providing other insurance.                                                                        
                                                                                                                                
Ms. Pierson replied that she  did not believe anyone covered                                                                    
under  the policy  would qualify  for  Medicaid because  the                                                                    
policy would be in effect.                                                                                                      
                                                                                                                                
Representative Wilson  noted Medicaid did not  have anything                                                                    
to  do with  whether  or  not a  person  had insurance.  She                                                                    
stated  that it  was related  to the  individual's level  of                                                                    
income. She  detailed that a  person qualified  for Medicaid                                                                    
if their income was low  enough. She noted that Medicaid was                                                                    
an insurance  policy and because  of the extras  provided in                                                                    
Alaska,   she  wondered   if   Medicaid   would  cover   the                                                                    
individuals.                                                                                                                    
                                                                                                                                
Ms.  Weissler replied  she did  not know  how to  answer the                                                                    
question. She  referred to a  document that had  been passed                                                                    
out  [by Co-Chair  Foster's office]  to  the committee  that                                                                    
included  definitions  for  health,  medical,  and  Medicare                                                                    
(copy on file).                                                                                                                 
                                                                                                                                
Representative  Wilson   referred  to  the   definition  and                                                                    
believed  Medicaid would  fall under  the medical  insurance                                                                    
category.                                                                                                                       
                                                                                                                                
Co-Chair Foster  recognized Representative  Charisse Millett                                                                    
in the audience.                                                                                                                
                                                                                                                                
2:43:15 PM                                                                                                                    
                                                                                                                                
Ms.  Pierson deferred  Representative  Wilson's question  to                                                                    
Mr. Wayne.                                                                                                                      
                                                                                                                                
Mr.  Wayne replied  that the  definition  of major  medical,                                                                    
which  was included  on the  handout. He  detailed that  the                                                                    
document listed  Medicare as a  major medical plan  under AS                                                                    
21.55.500   (a  definitions   section  relating   to  health                                                                    
insurance, but not necessarily  about health insurance being                                                                    
discussed  in   the  bill);  it   was  the   only  statutory                                                                    
definition Legislative  Legal Services  had found.  He asked                                                                    
for a repeat of the question.                                                                                                   
                                                                                                                                
Representative  Wilson  clarified  she  was  speaking  about                                                                    
Medicaid,  not  Medicare.  She specified  that  Medicaid  is                                                                    
based  on a  person's  income  - a  person  could apply  for                                                                    
Medicaid at  any time.  She continued that  if a  person was                                                                    
eligible,  Medicaid covered  health  insurance, dental,  and                                                                    
other extras. She  was trying to determine that  if a person                                                                    
qualified for  Medicaid they would  not be eligible  for the                                                                    
other insurance under the bill.                                                                                                 
                                                                                                                                
2:45:21 PM                                                                                                                    
                                                                                                                                
Ms. Pierson answered that Medicaid  was usually the payer of                                                                    
last resort, as long as  another insurance was available the                                                                    
person would not qualify for Medicaid.                                                                                          
                                                                                                                                
Representative Wilson explained that  she had been concerned                                                                    
that  an individual  may end  up  going back  and forth  and                                                                    
could  become disqualified  when  their  income changed.  It                                                                    
would be  a hardship  on families if  they were  passed back                                                                    
and forth between  plans. She asked someone  to double check                                                                    
that if a person had a health  plan that they may be able to                                                                    
receive the  supplements and would  not be  disqualified for                                                                    
the insurance under the bill.                                                                                                   
                                                                                                                                
Vice-Chair Gara believed Medicaid did  not count as the kind                                                                    
of  insurance a  person  would receive  under  the bill.  He                                                                    
reasoned that major  medical was defined in  AS 21.55.500 as                                                                    
an expense incurred insurance. He  relayed that Medicaid was                                                                    
not an expense incurred insurance.                                                                                              
                                                                                                                                
2:46:51 PM                                                                                                                    
                                                                                                                                
Vice-Chair Gara  spoke to the three  fiscal notes associated                                                                    
with the  bill. The first  was a  zero fiscal note  from the                                                                    
Department  of Public  Safety (DPS).  He explained  that DPS                                                                    
would  manage the  fund that  funded  the benefits  provided                                                                    
under the  legislation at no  cost with existing  staff. The                                                                    
next fiscal note had no  OMB component number because it was                                                                    
the creation of  a new fund called  fund capitalization. The                                                                    
note  reflected  the  cost  of  the  program,  estimated  at                                                                    
$70,100 in  FY 18 through FY  23. The last note  was for the                                                                    
Department  of Administration,  Division  of Retirement  and                                                                    
Benefits  and  had zero  fiscal  impact.  The Department  of                                                                    
Administration  would  help DPS  manage  the  new fund  with                                                                    
existing staff.                                                                                                                 
                                                                                                                                
Co-Chair  Seaton  MOVED  to  REPORT   CSHB  23(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
                                                                                                                                
Representative  Pruitt noted  he WITHDREW  his OBJECTION  to                                                                    
the adoption of the CS.                                                                                                         
                                                                                                                                
There being NO further  OBJECTION, CSHB 23(FIN) was REPORTED                                                                    
out of  committee with a  "do pass" recommendation  and with                                                                    
one   new  zero   fiscal  note   from   the  Department   of                                                                    
Administration;   one  new   zero  fiscal   note  from   the                                                                    
Department of Public Safety; and  one new fiscal impact note                                                                    
from the Office of the Governor for Fund Capitalization.                                                                        
                                                                                                                                
Co-Chair  Foster addressed  the schedule  for the  following                                                                    
meeting.                                                                                                                        
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
2:50:33 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:50 p.m.                                                                                          

Document Name Date/Time Subjects
HFIN Governor's Amendments 2-16-17.pdf HFIN 2/16/2017 1:30:00 PM
HB 57
HB 58
HB 95
HB 23 NEW FN FUND CAP 2-16-17.pdf HFIN 2/16/2017 1:30:00 PM
HB 23
OMB Response to HFIN Questions 2-16-17.pdf HFIN 2/16/2017 1:30:00 PM
HB 57
HB 59
HB 95